Since you've probably never had to worry about taxes in relation to your previous home situation, now's the time to start learning just how much your home has changed your tax situation. While it's true you will now be responsible for paying property taxes, you will also be able to take advantage of the tax benefits from the IRS. Here is a rundown of what you can expect to gain from your home ownership:
- Your loan discount points and other loan fees may be deductible in the year that you purchased your home
- Mortgage interest each year may be deducted from your income taxes when you itemize
- You may deduct your interest that you borrowed for a second mortgage
- You may be able to deduct your property taxes
- In some cases, you may also be able to sell your home without having to pay any income taxes (up to $500,000 for married couples and $250,000 for singles)
It's been said that property taxes are no fun for anyone to pay as they change according to the value of your home and the property. And even if you ask the previous owner what they had paid, you might not get the same assessment when it comes time for you to pay up. Therefore, it is important to be prepared for any increases.
To keep the value of your home up and your investment sound, you will need to start thinking about home improvements that you might want to make. What this will do is keep the value of your home high when you go to sell it to someone else. Think about adding luxury features like a pool, if that's something that works well with your climate and location, for example. You might also want to consider replacing the roof and other major systems in the house to make sure your home is comfortable and modern.
If you need money for repairs or for these home improvement projects, you will be happy to know that you can borrow against the value of your home with a home equity loan. This kind of loan uses the value of your home and the equity you may have gained and adds the borrowed money to your overall loan amount — allowing you to have some extra money for various purposes.
Another thing to consider post closing is that you shouldn't say goodbye to your lawyer just yet. They might be able to help you if the arrangements with the house are not quite the same in a few years. For example, if you are going through a divorce or the owners of the home are changing due to death or sales, you will need to consult your attorney to make sure these transactions are valid and legal.
Your attorney can also help you with tax issues concerning your home or with various permits that you might need to acquire for certain housing projects.
The process of owning a home never quite finishes, but that's part of the fun of being an owner in the first place. The work is never done, but neither are the rewards.