Tax benefits of buying a new home in Dec 2018 or later and documents needed for that

[p_s_92]

I understand I get to deduct mortgage interest, discount points paid to lower interest, private mortgage insurance and property taxes on home. Our average gross income is 160K and the homes we are looking are in range of 400-450K in south of Denver, CO. I saw the useful article at https://turbotax.intuit.com/tax-tips/home-ownership/buying-your-first-home/L5QxJLcQT

I understand a 1098 from our mortgage lender will help with some information.

1. What else can I claim to reduce my taxes?

2. Can cost of adding solar panels be deducted?

3. What documents would I need to claim the tax deduction?

4. Will the lender issue me a receipt for paying for discount points?

5. Do I need to keep track how much I am paying each month for loan principal and interest or will the lender send me something I can use during tax filing?

6. Should I keep track of mortgage insurance I am paying since our down-payment will be 10% of home price or will I get a document for that?

7. Anything else I should be aware for reducing my taxes?


Thanks

[xmasbaby0 · Accepted solution]

Buying a home in December will do little (or nothing) for your 2018 tax return.   If you do not already have a deal ready to close, your chances of doing that by the end of December are slim.  For 2019:

Home Ownership

There is not a first time home buyers credit on a Federal return. That ended in 2010. If your state has such as credit, you will be able to enter it when you prepare your state return.

Buying a home is not a guarantee of a big refund.  Your deductions for homeownership combined with your other deductions (if any) must exceed your standard deduction to change your tax due or refund. If you purchased your home late in the year, you do not even have a full year of home ownership deductions.

Your closing costs on your new home are not deductible except for prepaid interest, prepaid property tax or loan origination fees.  There are no deductions for appraisal, inspections, title searches, settlement fees. etc.

Your down payment is not deductible.

Your homeowners insurance for fire, hazard, flood, etc. is not deductible for your own home.

Home improvements, repairs, maintenance, etc. for your own home are not deductible.  

Homeowners Association  (HOA) fees for your own home are not deductible. 

In late January or early February, homeowners who have mortgages receive a 1098 from their lender, showing how much mortgage interest, loan origination fees, and property tax was paid for the tax year.  That is what you use on your tax return.

There is now a $10,000 limit on how much you can deduct for property tax, state and local taxes, and sales tax.  (SALT)  Many people will find that with these limits, they are unable to itemize on their tax returns, because even with these homeownership costs and mortgage interest, their itemized deductions may not exceed the standard deduction. 

2018 Standard Deductions:

Single   $12,000  (+ $1600 65 or older)

Married Filing Separately    $12,000  (+ $1300 65 or older)

Married Filing Jointly  $24,000  (+ $1300 each spouse 65 or older)

Head of Household  $18,000  (+ $1600 65 or older)

Please read about the laws regarding mortgage interest, home equity loan, and SALT:

https://ttlc.intuit.com/questions/4482394-how-will-tax-reform-affect-my-2018-federal-tax-return

[rjs]

As of now the deduction for private mortgage insurance expired at the end of 2017 and has not been extended for 2018 or later. It's still possible that Congress will extend it for 2018, but that remains to be seen. You can't count on being able to deduct it.

[xmasbaby0]

In 2018 they decided late in the tax season to extend it for 2017 returns and sent everyone who had already filed scrambling to amend.

[p_s_92]

Thanks so much. I thought some green home improvements can reduce the taxes like <a rel="nofollow" target="_blank" href="https://turbotax.intuit.com/tax-tips/home-ownership/energy-tax-credit-which-home-improvements-qualif...>

[xmasbaby0]

It depends on what Congress does with those energy credits.

[p_s_92]

Thanks, does it mean if those improvements are done in 2019, a homeowner can deduct them? Or, as of now it is undecided waiting for Congress?

[xmasbaby0]

We cannot say what Congress will do with the energy credits for a 2019 tax return. Some are good through 2019.  If you did such an improvement in 2019, then it would go on your 2019 tax return.  2019 has not even begun--we do not know what Congress will do in 2019.  

[rjs]

For a number of years now, Congress has had the bad habit of making retroactive tax changes in December, or even after the end of the year. Energy credits have been one of the things that they tend to put off until the last minute. It does make tax planning difficult.

[p_s_92]

Thanks, there are some changes going on at my workplace. I may be asked to move to another town (possibly in another state) where we have an office, but that is not 100% sure.

My boss told me to go ahead with house purchase since he is not 100% sure if I will be asked to move to another town or not. He feels if I am not asked to move, I can get a house where I am getting equity with each mortgage payment instead of renting.

A. If I buy a house then asked to move out of town for work reasons without being able to live in the house I bought, make mortgage payments for 6 months, then decide to sell the house, what are the tax matters I need to be aware of?

[p_s_92]

P.S. My relocation to another town was a possibility 3 years ago, but did not happen. I spent 36000 in rent in three years.

[p_s_92]

I am living in Colorado, south of Denver if that matters

[VolvoGirl]

This is a forum for help with entering your info into Turbo Tax.  Your question is beyond the scope of this forum.  You might need to see a local financial planner or accountant.

[xmasbaby0]

We can tell you that moving expenses—even for a job-related move—are not deductible under the new tax laws.

[philiphawkes-teeter]

In Turbo Tax 2021, I am unable to enter my property taxes. I can enter the taxes for my secondary, but not my primary home.