Some years ago, you may have thought that owning a home isn’t achievable. This is a result of many costs such as inspection fees, legal expenses, land transfer taxes, cost of buying the real estate, among other costs. But you’ve made it, and you need to consider a few government incentives that might help you recover some of the costs. One of them is a tax credit. Read on to learn more about the tax credits you can get after buying a home for the first time.
What is a first-time home buyer’s tax credit?
This is a tax credit that can be claimed by first time home owners who meet certain qualifications. The tax credit is nonrefundable and aims to reduce your tax burden dollar for dollar. For this tax year, the tax credit is not available when filing tax with the federal government. However, many states across the US are offering first time home buyer tax credits to the taxpayers. There are other similar programs that can help you recover the tax-related cost such as grants.
Who qualifies for the tax credit?
As mentioned, the federal tax credit for first time home buyers is not available, but you can still enjoy other tax benefits in other forms. First of all, you need to be a first time home buyer. Also, you need to meet specific income limits in your local area and you should not buy the home from a relative. Other requirements include having a certificate such as a mortgage credit certificate that allows you to convert a percentage of the mortgage interest you pay to a tax credit, among others.
Tax credits and benefits you can take advantage of instead
If you didn’t buy your home between 2008 to 2010, you may not claim first time home buyer tax credit. However, your local or state government may have other programs that can help you recover some of the expenses revolving around buying a new home. When it comes to the taxes, if you are paying mortgage interest, you can claim a mortgage interest deduction. In addition, you can consider property tax deductions and renewable energy tax credits if you’ve upgraded your new home with energy-efficient equipment such as solar panels, heating and air conditioning systems.
How to claim the tax credit?
You can claim this tax credit if your state allows first time home buyers to claim the credit. All you need is to gather the right documentation and fill in the right forms when filing your taxes. If you qualify for the tax credit, it will help reduce your actual tax liability. However, if you don’t have a tax liability, there is no need of claiming this tax credit because it is nonrefundable. However, if you don’t know how to go about it, you can hire a tax professional or use a tax filing program to file your taxes. That way, you will take advantage of most of the deductions and credits you qualify for when filing your taxes.
Although the tax credit for first time home buyers is not available at the federal level, there is an Act of 2021 in congress that aims to bring it back. If the act is passed into law, new first-time home buyers can claim tax credit after purchasing a new home. Before then, you can consider some of the tax benefits you can take advantage of such as mortgage interest deduction, energy-efficient tax credit, grants, among other programs to recover some of the expenses incurred when purchasing a home for the first time.