Potential Tax Deductions
Your status as a homeowner can unlock new deductions at tax time.
Here’s a quick summary of the items you may be able to deduct. Always consult with a tax professional to get a complete understanding of how tax laws may apply to your home purchase.
- Mortgage interest: You may be able to deduct the interest you pay on your loan. Homeowners will see what they paid in mortgage interest for the prior year on IRS Form 1098: Mortgage Interest Statement.
- Property taxes: You can often claim annual property taxes as an income tax deduction.
- VA Funding Fee: The annual amount you pay toward your VA Funding Fee is likely tax deductible. It’s always best to consult the IRS or check with a tax professional.
- Discount point fees: Any fees that you pay to lower the interest rate on your mortgage are also deductible.
- Moving expenses: If your move was due to a military order or PCS, you can deduct a portion of your moving expenses. If your move was not ordered by the military, you may still be able to deduct moving expenses but additional criteria will apply. Check with the IRS or your tax advisor for more details.
Another interesting tax tidbit could come into play if you later sell your home at a sizable profit. In most situations, the profit earned on the sale of your primary residence can’t be taxed. That benefit is limited to the first $250,000 in profit for a single-filing taxpayer or the first $500,000 in profit for a married couple who file jointly. Profits over those thresholds are usually taxed at the normal rate.
Property Tax Exemptions
Some disabled veterans may receive a property tax exemption depending on where they live. Policies can vary depending on the state, your disability rating, the value of the property and more. Check with your state or local veterans affairs office for more information.