The perfect home. Hopefully, you feel like this describes yours if you’re just getting into your first one.
Owning your first home can be an exciting experience and a learning curve. Getting word that you have been approved is a significant sort of milestone. Going from renter’s status to owner is a real reward for your years of hard work. Even if your starter home is relatively modest, it’s your castle and you are fiercely proud of it.
The sense of pride and new financial confidence you get from buying your first home is worth it all on its own, but there are more perks to being a first-time homebuyer. It’s time to file your taxes again and you can certainly take advantage of your new ownership status when you file your return.
In the eyes of the IRS, a first-time homebuyer is someone who has not owned their principal residence for the past 3 years. Married couples both have to meet the 3-year qualification. Whether you prepare your own taxes or have someone do it for you, the following tax breaks you could be eligible for can really be worth the extra paperwork.
Energy-Related Tax Credits
Here in the sunny Old Pueblo, it hardly makes sense not to have some source of solar energy to power your home. With an estimated 320 days of sunshine per year, you can save hundreds of kilowatt-hours on your energy bill and reduce coal consumption, plus the government rewards homeowners who install solar, geothermal, or wind systems to generate electricity.
The Solar Energy Systems credit is worth 30% of the cost until December 31, 2019. If you install a fuel cell system to generate electricity, you can get a tax credit of 30% of the cost, up to $500 per kilowatt of power generated.
The federal government is also offering a general credit to homes outfitted with energy-efficient appliances. You can get 10% of the cost up to $500 or a specific amount from $50-$300. This credit is set to expire on December 31, 2016
If you’ve already made this eco-friendly improvement, use IRS Form 5695 Residential Energy Credits to claim your credit. Find the form at the IRS website www.irs.gov.
Mortgage Interest Deductions
You can write off mortgage interest and even property taxes for your home as long as it qualifies as a principal residence. Consult your financial advisor for the limits and your particular eligibility.
Mortgage Credit Certificate
The MCC is a first-time home buyer’s credit that allows buyers a dollar-for-dollar match on a portion of their mortgage interest paid annually.
The MCC tax credit is an advantageous program available to new home buyers in the state of Arizona. You can apply this credit to about any type of mortgage save a few with restrictions, such as adjustable-rate mortgages. It reduces the borrower's federal income taxes, so in a way, it creates additional income for you to use in making your house note.
Your tax preparer or financial advisor will have more details on the monetary benefits of being a first-time home buyer, but the ones listed here are just a few that are active for your 2015 return. If you have questions, I will be happy to assist you however I can or direct you to a good source of answers.