Taxes and Your Purchase

Buying and selling properties can be very demanding when you’re trying to minimize expenses and keep your housing budget in good order.

The good news is that, with the tax benefits set in place by the government and the Internal Revenue Service, you can at least be sure that the tax payments associated with your real estate sales and purchases won’t be too much trouble.

Tax Benefits for Real Estate Purchases

The IRS can tell you that, in most cases, it may be possible to have some of your mortgage interest – along with any amount of daily interest that was covered on the settlement day – deducted in the year that it was paid.

Loan discount points and origination fees may also apply to this, regardless of who ended up paying them.

Even though most of the expenses you’ll need to cover during your purchase will not be tax deductible, this is one of the best examples of one that is. You will find that lines 801 and 802 of your HUD-1 settlement statement will confirm its validity, provided that it applies to you.

The good news is that you can still get a substantial deduction if the closing costs were managed by the seller. This is often done as an additional incentive to encourage buyers to purchase the property.

Interest on Your Loan

Since loans are set up in such a way that you end up paying the bulk of the interest at first, deducting the mortgage interest in the year it’s paid can bring several benefits.

It will not only be a considerable advantage during the first few years, but it can also be a genuinely beneficial incentive in the long run. You can see this as an exceptional opportunity for achieving a resounding success with long term home ownership.