Tax Deductions When you Purchase a Home

5 min read

Tax deduction books and papers with calculator and home renovation purchase receipts

When you buy and sell a home, you can spend a lot on closing costs, fees, inspections, and appraisals. That’s why we love helping our customers find ways to save money! Tax deductions do happen with home purchases, and you don’t always have to pay taxes when selling your house. It’s always best to consult with a qualified tax professional about your specific situation, but here is our list of possible deductions you can claim when buying a house.

Tax Deduction Opportunities

One-Time Deductions
* Prepaid Mortgage Interest Points

On-Going Deductions:
* Mortgage Interest Payments
* Mortgage Insurance Premiums
* Real Estate/Property Taxes

Unusual Deductions:
* Installing certified energy generating systems, like solar panels or geothermal heat pumps, can result in a tax deduction.
* Renovations for medical purposes, such as widening a hallway or installing a wheelchair ramp, can also give you a deduction.

Make sure to keep all receipts related to your home mortgage or improvements. It helps to work with a digital-first mortgage lender so you can easily access your documents anywhere.

Although there are few tax deductions for your actual home purchase, your yearly and home improvement deductions can add up nicely over the years for paying and upkeeping your house.

Do You Have To Pay Taxes When Selling A House?

The answer is maybe, but for most Americans, you will not owe taxes after selling your house. You must meet specific criteria before paying capital gains tax on your house.

Here is a list of situations for your primary residence:
* If your house is a second home or you did not live in it for two years after purchase, you will pay taxes.
* If you make more than $250,000 in capital gains as a single owner or more than $500,000 in capital gains as a married owner, you will owe taxes.

Keep in mind, if you made significant home improvements, you can deduct those renovation expenses to offset the capital gains taxes.

Whether buying or selling, tax deductions may play a part in your home purchase. Let Cake take a slice out of your worries. Call us with questions about the loan process. If you’ve already purchased a home with Cake and are looking for your tax documents, contact us. We’ll be happy to guide you.