Buying a House in 2017? Here Are 4 Tax Moves to Make Now

Did you know the IRS requires that you work full time for 39 out the 52 weeks that immediately follow your move into your new home.

Buying a home is a major undertaking and in most cases it will be the biggest purchase you will ever make. If a house is in your near future you may want to consider some of these tax strategies to make sure you have all of your ducks in a row before you start house shopping.

If You Are Self Employed Up Your Taxes

While nobody wants to pay more taxes, the higher your taxable income is on your loan application, the better you look to your mortgage lender. In order to raise your taxable income, slow down on the business expense deductions, this will help push up your taxable income, making you a more desirable candidate for a loan, and allow you to borrow more money.

Moving Expenses Are Tax Deductible

If you are moving at least 50 miles from your current location due to your job, you may be able to deduct some of your moving expenses. You will need to pass a few IRS rules and provide documentation of your expenses and move.

The IRS requires that you work full time for 39 out the 52 weeks that immediately follow your move. If you meet this requirement, and the moving distance is greater than 50 miles, you can deduct certain expenses such as the cost of movers and storage units to name a couple. Track all of your expenses, keep receipts and make sure you remember to take the deduction when it comes time to file your taxes.

Donate Unwanted Items

Clearing out your current home or apartment of unwanted furniture and other items is a great way to both lower your tax bill and your moving bill. Movers can be pricey so the less they have to move, the lower your moving bill will end up being.

In addition, all of your donations are tax deductible, which can help lower your tax bill at the end of the year. Be sure to ask for a receipt when donating your items and notate what items were donated on the receipt.

Calculate The Tax Benefits a House Brings

Once you purpose a home you will be eligible for certain tax deductions that are only available to homeowners. You can use some of these deductions to help raise the purchase price of your new home. The mortgage interest deduction is a big one that you should consider when setting a budget for your new home. You can use this loan tax deductions calculator to help determine what type of deduction you might expect after buying a home.

Deductions You Should Know About After You Buy a Home

Once you purchase a home, there are deductions that you can take to help lower your tax rate. Here are a few that you should be taking advantage of:

Interest and Property Tax:

As mentioned above, this is a big deduction and one that you should be claiming on your taxes. As a homeowner, you are generally allowed to deduct both the interest you pay on your mortgage loan as well as the property taxes that your lender pays on your behalf. This is can a major deduction, so make sure you take it.

PMI:

You may be able to deduct a certain portion of your private mortgage insurance premiums but there are restrictions. PMI is an insurance policy you must carry if you have less than 20 percent equity in your home. All mortgage lenders require it.

This deduction does start phasing out once you reach a certain income threshold. If you homeowner adjusted gross income (AGI) is above $100,000 the deduction starts to phase out.

The PMI deduction is reduced by 10% for each $1,000 your income is over the AGI limit and disappears completely once your AGI hits $109,000.

You Must Itemize to Take Deductions:

The days of using the EZ tax form are over once you become a homeowner, especially if you want to take advantage of all the deductions offered.

You must itemize all of your deductions on your tax form when filing your taxes. Your goal is to make all of the deductions total more than the standard deduction the government allows. Be sure to take advantage of all deductions that you are due, don’t forget to include those charitable donations and last years state taxes.

Owning a home is a major undertaking and being aware of all the various tax breaks for homeowners can take some legwork but in the end it will be well worth it when you close on your brand new house.