By now, most homebuyers know about the federal First-Time Homebuyers Tax Credit, which provides tax help of up to $8,000 for those who entered a contract to buy their home before April 30, 2010 and who will close the deal before June 30, 2010.
Congress is currently in the process of extending the tax credit deadline by three months for those who are backlogged in the home finance system. But unfortunately, many future homebuyers still will not be able to take advantage of the tax help from this credit. There are, however, other tax credits and deductions available that will allow new homebuyers to get some much-needed tax help.
California’s Home Buyers Tax Credit
The state of California has recently announced a tax credit that will give new homebuyers up to $10,000 or 5% of the home’s sales price (whichever is less) of tax help in the form of a rebate spread over 3 years. Note that if you owe no taxes you cannot receive this rebate. Additionally, if you owe less than $3,333 in taxes a given year, your rebate will be adjusted accordingly. California only has a limited amount of funding for this program, so take advantage of this tax help while it’s available.
Tax Deduction for Mortgage Points
Deducting mortgage points is a common federal tax strategy. When you buy your home, you are usually charged mortgage points which are paid up-front at loan closing. These points can be deducted for tax help, allowing you to reduce your taxable income by 1% to 3% of your loan amount ― as long as the points were paid in the same year. Points that you paid to refinance an existing mortgage may also be eligible for a tax deduction.
Tax Deduction for Moving Costs
You can also get some tax help by deducting moving costs due to job relocation, if you have purchased a new home in order to live in that area. Deductible costs include storage, hotel fees, moving services, and other travel expenses. To qualify, your new job must be at least 50 miles further from your old home than your old job was, and the move must take place within a year of starting your new job. At the new job, you must work full-time for 39 weeks during the 12 months following your move. If you are self-employed, you must work at least 78 weeks in the 24 months after you move.
Tax Deduction for Mortgage Interest
Finally, you can deduct the interest on your home mortgage (or even your second mortgage) from any loan amount up to $1,000,000. You can also deduct the interest from a home equity loan (HEL) that was used to make improvements to your home. This should be a huge tax help to many filers.