Tax breaks when buying a house.?

Can someone explain how the tax break works when you buy a house. I know you can some sort of break on the interest paid on a mortgage. Can someone explain this in more detail or perhaps provide some examples?

Update:

Also, what do they mean when they say your are in the 25% tax bracket?

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  • 1 decade ago
    Best Answer

    you must be talking about the new $8000 tax credit Obama just signed into law. Basically buy any house until December this year and get an automatic tax credit of up to $8000 on your taxes. Its the refundable kind so even if you are due a refund, you get that refund plus $8000 extra! I just filled my taxes and I claimed last year's first time home buyer credit of $7500 and made a nice refund this year! But, you got it made, I have to repay my $7500 back to uncle sam in a 15 year period. The new Obama $8000 first-time buyer tax credit version doesn't have to be re-paid. You're essentially getting an $8000 gift for buying a house. Jump on it man!

    Source(s): self experience
  • 1 decade ago

    Dear Hen: When you buy a house you are permitted to deduct mortgage interest and property tax as well as others items on Sch. A. Until the recent down turn in property values a home was considered to be a prudent investment for the long haul as property values have historically increased year after year.

    Tax rates start at 10% to $8025 15% $8025-$32,550 25% $32,550-$78,850 28% 33% 35% follow. These rates apply to taxable income for a single individual.

    This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent Master Tax Advisor

  • Anonymous
    1 decade ago

    Instead of sending the money to the IRS, you send it to a bank. Some people prefer this.

    You add up the interest you paid, the property taxes you paid, charity and do a schedule A. The first $5450 doesn't count (if single, it's $10900 for married). The excess reduces your income and presumably your income tax as well.

    So you spend $10,000 in interest to save $1500 in tax.

  • 1 decade ago

    Thats if you qualify for the first time home buyer credit. Not sure why anyone wouldnt claim it if they could

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