Tax Deductions Sweeten the Pot for Prairieville Homebuyers

If you're thinking of buying a new Prairieville home this year, you may already be familiar with the $8,000 first time homebuyer's tax credit. That's a great incentive! It can now even be used toward the downpayment or closing costs, but if you wait to get with your tax return, it could pay for most of your new deck or buy a lot of drapes and appliances.

Even before the current tax credit came into being, there are many tax advantages to owning a home. Some might help you now and some later, but since buying a home is a long term investment over time, most of these credits will interest you.

Yearly mortgage interest deduction: You can deduct up to one million dollars in interest on you primary residence or second home. These deductions are familiar to most people. Recent discussions about reducing or eliminating this mortgage credit met with public outcry, so you are safe in assuming that mortgage interest will offset your mortgage in the future.

Property tax deduction: All property taxes are deductible as well.

Points: If you bought a new home or refinanced an old one, your origination fees or points are deductable in the year you paid them. Closing costs are not deductible but hold on to your records - you may be able to deduct them when you sell.

Private mortgage insurance (PMI): If you need PMI because your down payment is less than 20%, you can deduct the cost of premiums if your income was less than $100,000 and your loan originated between December 31, 2006 and January 1, 2011.

Moving expenses: If you relocated for a full time job 50 miles or more away, the cost of packing, transporting, and storing your furniture is deductable.

Energy credits: If you replace door or windows, add insulation, or add alternative energy sources, you can qualify for a credit. Make sure to follow government directives so you purchase the right thing and keep your receipts.

Damage claims: If your home was damaged from a sudden unexpected event such as a natural disaster, fire, vandalism, or theft, you can deduct whatever your home insurance did not pay, less a $100 deductible and 10% of your gross income. Hopefully you won't need this credit, but knowing how hurricanes love to visit Louisiana, this could come in handy.

Capital gains: When you sell your home, you may have to pay capital gains tax - but not unless your profits exceeded $500,000 for married couples or $250,000 for single owners.

Improvements and closing costs: You can't deduct the cost of home improvements for your personal residence. When you sell, the cost of any permanent improvements as well as closing costs can be deducted to offset any potential capital gains liability.

Short sale debt: You can exclude debt up to $2 million if the lender forgave the debt in 2007, 2008, or 2009 after the short sale of your home.

Buying a home is not just a dollars and cents thing for most buyers. The various tax credits and incentives, however, make your purchase even more attractive.

Want to know more about the home buying process? an in-depth look at what to consider when buying a home, don't forget our Free Seminar for Baton Rouge Area Homebuyers on June 23 at 6:00 pm. Lending representatives will be on hand to address credit and mortgage issues. To register or for more information, please email info@sandyco.com or call (225) 292-7609.

Wondering how much home you can afford? Sandy's Team will help you work up the numbers and help you find an affordable home in Prairieville, Baton Rouge, or anywhere else in the tri-parish area of Ascension, East Baton rouge, or Livingston. Visit our Sandyco.com website today.