Homeowner's Guide to Tax Deductions

HOMEOWNER’S GUIDE TO TAX DEDUCTIONS

If you own your own home, it can pay off at tax time!  For 2012, see if you can take advantage of these home ownership-related tax deductions, credits, and strategies to lower your tax bill with our homeowner’s guide to tax breaks!

One of the most popular deductions itemizing home owners can take advantage of is the Mortgage Interest Deduction.   To get the deduction, your mortgage must be secured by your home.  Interest you pay on a mortgage of up to $1 million — or $500,000 if you’re married filing separately — is deductible when you use the loan to buy, build, or improve your home.

You can also deduct the cost of Private Mortgage Insurance thanks to the government extending it through 2013.   However, you must itemize your return and it only applies to loans taken out in 2007 or later.  Private mortgage insurance, also called PMI, usually occurs when you don’t have a sizable down payment and the lender requires the mortgage to be insured.   The premium on that insurance can be deducted, so long as your income is less than $100,000 (or $50,000 for married filing separately).

If your adjusted gross income is more than $100,000, your deduction is reduced by 10% for each $1,000 ($500 in the case of a married individual filing a separate return) that your adjusted gross income exceeds $100,000 ($50,000 in the case of a married individual filing a separate return).

Prepaid Interest, also called points, is also 100% deductible in the year you paid them along with other mortgage interest.  If you refinance your mortgage and use the money for home improvements, any points you pay are also deductible in the same year.  However, if you refinance to get a better rate or use the money for something other than home improvements, you’ll need to deduct the points over the term of the loan.

The government extended the Energy Tax Credit for 2012 and 2013, although significantly reduced.   If you upgraded one of the specific items listed on the EnergyStar website, you can receive 30% tax credits on projects geared toward environmental-friendly homeowners.

Of course, you can also deduct the Real Estate Property Taxes you pay. If you have a mortgage with an escrow account, the amount of real estate property taxes you paid shows up on your annual escrow statement. If you bought your home in 2012, check your HUD-1 Settlement statement to see if you paid any property taxes when you closed the purchase of your house. Those taxes are also deductible.

HGTV Dream Home Giveway 2013

HGTV Dream Home Giveaway 2013

We love any contest that offers a home as the prize!  Now through February 15th, enter for your chance to win the furnished HGTV Dream Home 2013 - a low country Zen coastal cottage located on Kiawah Island in South Carolina, PLUS a new GMC® Acadia® Denali® and $500,000!

You may enter twice a day online - once on HGTV.com and once on FrontDoor.com.  Visit HGTV for the official rules of the Dream Home contest.

And don't forget if you are looking for Austin real estate and homes for sale, contact Texas Capital Properties!  You can find your own dream home right here in the Capital of Texas!

Myths About Buying a Home

5 MYTHS ABOUT BUYING A HOME

There are many real estate myths about buying a home.  Whether you are a first time home buyer or seasoned investor, it’s important to distinguish between fact and myth.  Knowing the difference between the two can save you thousands and peace of mind.  Here are 5 myths about the home buying process to help you on your way to home ownership.

Myth #1: You’ll Find the Perfect Home

As a first-time home buyer, you may get caught up in the excitement of buying.  But you need to remember that just because you have a vision of your dream home that doesn’t mean you’ll find it.  Not every home is going to meet your expectations.  Most homes will have a flaw or two, and sometimes many more.  It’s important to look at the big picture and not obsess over finding the dream home.  If you find a house that meets most of your needs and wants, then you’ve done a pretty good job in finding the right house for you.

Myth #2: You Should Buy a Home You Can Grow Into

Many first-time home buyers may have heard this before – look for a home you can grow into.  Not so, especially if you consider that most first-time home buyers spend less than 5 years in their first home.  You need to think about where you plan on being in the next few years, but many things in life are unexpected.  You may need to relocate for a job or school.  You may decide you like another area.  You just never know what circumstances will change in the future.  Do you really want to buy the 5 bedroom home so that you can accommodate all the future kids you plan on having?  Look at your current needs and any short-term goals you have and go from there.  Buy a home that suits you for today and that is affordable.

Myth #3: The Best Deals are Distressed Properties Like Foreclosures

In the past five years, we’ve seen an influx of foreclosures and short sales in the real estate market.  Some are offered below market value and some are not.  Some need very little work and some need a complete overhaul.  If you are only focused on finding the lowest price, you will miss out on some great homes.  Figure out what’s important to you in terms of fixing up and affordability.  There are many motivated sellers willing to negotiate with the right buyer.

Myth # 4: You Must Have Perfect Credit to Buy a House

While it’s true that lenders have tightened up lending standards the past few years, you certainly don’t need perfect credit to purchase a home.  The best thing to do is get in touch with a reputable lender to go through your credit report with you.  The sooner you get your credit in order, the better prepared you’ll be when it comes time to start looking for a home.

Myth # 5: You must have at least a 20% down payment.

The traditional down payment of 20% percent is not needed to buy a home.  If you qualify, consider an FHA loan where the down payment is as little as 3.5% down.  A VA loan requires no down payment at all and is available to all eligible veterans.  The important thing to remember is that there are programs out there that can help you purchase a home.

Buying a home is one of the biggest investments you can make.  Our goal at Texas Capital Properties is to help you find the right home, negotiate the best price and navigate the home buying process as smooth as possible.  Our Austin real estate agents represent buyers throughout town looking for new construction, resale homes, distressed properties, and downtown condos.  We are the Austin-area real estate experts to help you find your home today.  Contact 512-587-3732 or visit our website to get started.