Homeowner Tax Tip #1: Purchasing a Home

Immediately deductible items include prorated real estate taxes, loan origination fees (points), and prorated mortgage interest. Most everything else is added to your home’s basis and includes things like real estate commissions, attorney fees, and recording costs. Often times one of the largest parts of the closing costs are amounts paid to establish escrows for property taxes and insurances. Escrow amounts are not immediately deductible and do not add to your home’s basis. Since escrows are merely funds set aside in a separate account, they do not become deductions until your escrow agent actually submits those amounts for payment on property taxes (property insurance is a personal expense and is not deductible when escrowed or paid).

The following white paper outlines a series of tax laws in regards to homeownership: http://www.dh-cpa.com/client_media/files/pdf/2015RefNL_TaxTipsHomeowner.pdf

Need help analyzing what tax breaks you may be eligible for? Davis and Hodgdon Associates CPAs has been assiting nonprofits, individuals and businesses with tax and accounting services in the Burlington Vermont Metro area for more than 20 years. If you have any questions or concerns please feel free to call 802.878.1963 or email [email protected].