First-time homebuyers can get the most out of their first and probably biggest purchase of their life through the different tax credits being offered by the government. Here are the three things you need to know about tax breaks and the first-time homebuyer tax credit:
1. First-Time Buyers can Qualify for Several Tax Breaks
Yes, one of the advantages of switching from renting to homeownership is that the government provides several tax breaks for first-time buyers. Trulia reports on several tax breaks that are currently being offered for first-time buyers.
One of the current tax breaks being offered includes the mortgage interest deduction. This is said to be the biggest tax break for first-time buyers, as the interest being paid for the mortgage will be deducted. It, however, only applies to your primary residence.
Other tax breaks offered for first-time buyers include points, real estate taxes, energy efficient tax credits and individual retirement account withdrawals. As previously reported on Realty Today, households that equip their homes with energy efficient devices or improvements can qualify for the tax credit, which was extended till the end of 2016.
2. The Term 'First-Time Homebuyers' Does Not Necessarily Mean Your First Home
The term first-time homebuyers may confuse a lot of people. However, the aforementioned publication notes that the term has a broader definition than the common belief.
Those who qualify for the first-time homebuyer tax credit include those who did not own another primary residence three years before the purchase was made. This was added to avoid giving tax credits to flippers.
3. Your Income Must Fall Within a Certain Range
The first-time homebuyer credit still applies to those who purchased a home in 2008, 2009 and 2010. There were, however, certain income limits imposed in order to qualify for the said tax credit.
For example, those who purchased from April 9, 2008 to Nov. 6, 2009, should not have an income more than $75,000. The limit was raised to $125,000 for buyers who purchased between Nov. 6, 2009 to April 30, 2010.
