As I write this, the GOP has just passed the most sweeping tax reform bill in more than 30 years. Thankfully, if you purchased a home in 2017, you’re not going to need to worry about navigating those changes until you do your taxes at this time next year.
Here are some things you will want to keep in mind as you pull documents together for your tax advisor, think about home tax deductions, and prepare to do your 2017 taxes.
Documents to bring to your tax advisor (if you have them):
- Closing disclosure – The lender who approved your loan would have provided you with a closing disclosure for the purchase of your home. It includes the loan terms, projected monthly payments, and how much you will pay in fees and other costs.
- Year-end tax document (Form 1098) from your lender – The includes information about how much you’ve paid in interest, real estate taxes, and points on a loan.
- Mortgage Credit Certificate – This is issued by your state or local government at your closing.
- Real estate tax receipts
- Receipts for any major home improvements or renovations
Your tax advisor will determine which deductions or credits you qualify for—it’s just up to you to provide any and every form of documentation required to make those determinations. He or she will also total up your deductions to determine if it would be better for you to itemize your return or take the standard deduction.
Possible Home Tax Deductions and Credits:
- Loan costs and fees – This information should be listed on the closing disclosure
- Mortgage points – If you purchased points to qualify for a lower interest rate over the life of the loan, you may be able to deduct that amount from your federal income tax.
- IRA withdrawals – The IRS allows some homebuyers to use IRA funds to help cover down payments and closing costs. Depending on the amount taken out, you may not have to pay a penalty—but you will likely still need to pay taxes on the money withdrawn.
- Mortgage interest tax deduction – You should receive a Form 1098 from your lenders.
- Property taxes
- Private Mortgage Insurance (PMI)
- Mortgage tax credit
Finally, don’t forget that if you work out of your new home, you may be able to deduct a portion of your home ownership costs. Those costs may include electricity, internet services, heat, and others expenses that fall under the home office deduction.
Be sure to consult your accountant or tax advisor to verify your taxes are done correctly, legally, and that you’re maximizing any deductions or credits you may be eligible for as a new homeowner.