Whether you are buying a house for the first time in Denver or the second, it is always going to be a significant financial decision. It is not only going to be a fulfillment of your life’s dream but it also will affect your financial standing in several ways, the most important being through your tax return. However, all these considerations should not affect you when you are buying your first property.
In this post, we will discuss all the benefits that will accrue to your tax return when you buy a Denver home before the end of the year.
1. Mortgage Interest Deduction
A first-time home buyer might not know about it but there are several tax advantages of owning a home. One of the most important is the ability to reduce the mortgage interest paid in the financial year from your taxable income. The advantage here is that if you buy a home before the year ends, the mortgage interest payable is deductible from your taxable income for the whole year. This can have a positive effect by reducing your taxable income and the tax to be paid.
The amount saved on the tax bill is more if you are a first-time homeowner, paying higher mortgage interest in the early years of the mortgage. Take help from a tax professional before filing your tax return if you are buying your first property in Denver before the end of the year.
2. Property Tax Deduction
It is not only the mortgage interest that is reduced from your taxable income, you can also deduct the property taxes that you pay on your home. Here too, you are allowed to deduct the property taxes paid for the entire year when you buy your Denver property before the end of the year. As in the case of the mortgage interest, your deductible for property tax will also significantly lower your tax bill.
If you need help buying your first home and guidance in getting all the tax deductions right, contact our experts at Just Livin Realty.
3. Closing Costs Deduction
When you buy a home, you will likely incur various closing costs, such as loan origination fees, title insurance, and appraisal fees. While these costs can be significant, they are tax-deductible. When you buy a home before the end of the year, you can deduct these closing costs from your taxable income, reducing your tax bill. These deductions are very welcomed after the purchase of your new Denver home!
4. Capital Gains Tax Exemption
When you sell your home, any profit booked on the sale is subject to capital gains tax. However, there is an exemption here. If you have lived in the house for a minimum of two years in the last five years, there is a reduction in capital gains tax by $250,000 for single tax payers and up to $500,000 for married tax payers filing jointly.
If you buy a house before the year ends, the clock for the two-year residency rule will start immediately, shortening the time required to claim the exemption when you sell your home. You can book your profits and make money within a two-year span when you are buying a house for the first time in Denver.
5. Energy-Efficient Home Improvements Tax Credit
If you plan to make energy-efficient improvements to your new home, such as installing solar panels or upgrading your HVAC system, you may be eligible for a tax credit. The Residential Energy Efficient Property Credit allows homeowners to claim a credit of up to 26% of the cost of qualifying improvements. By buying a Denver home before the end of the year and making these improvements, you can claim the tax credit on your next tax return. These credits will add up, saving you a fortune on your taxes.
6. Home Office Deduction
If you work from home, you may be eligible for a home office deduction. This deduction allows you to deduct a portion of your home expenses, such as mortgage interest, property taxes, and utilities, that are related to your home office. By buying a home before the end of the year and setting up a home office, you can start taking advantage of this deduction on your next tax return.
Buying a Denver home before the end of the year can have significant tax benefits. From the mortgage interest deduction to the capital gains tax exemption, owning a home can lower your taxable income and reduce your tax bill. If you are considering buying a home, you should consult with a tax professional to understand how homeownership will impact your tax return and to ensure that you are taking advantage of all available tax deductions and credits. The article above is provided for informational purposes only and shouldn’t be taken as legal or financial advice. Always consult a tax professional for assistance.
However, if you need help buying a home in Denver, Just Livin’ Realty Group has the knowledge, dedication, and ability to help you find your ideal property. Let’s work together so that you can buy a home before the end of the year in Denver! Reach out to our office today! 720-730-2289