Buying a house, how does that affect my tax returns?

I am a first time homebuyer and am very confused on the process. I was wondering how buying a home affects my tax returns. Right now I am getting a $3,000 return from being a student and working full time. I am claiming 0. I am wondering if by buying a house if I would have to start paying in to my tax return? I live in FL so I can get the homestead exemption, but I have no idea what that even means. Can someone be so kind as to explain the process to me. Thank you!

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  • kevin
    Lv 6
    9 years ago
    Favorite Answer

    Actually just the opposite. when you buy a home you will pay property taxes that should be paid by an Escrow (an account used to accrue money to pay property taxes at then end of the year). You will be able to write all of that off on your income taxes. Not only that but you will be able to write off all of the interest payments you will be paying to the mortgage company during your 30 year loan. ex: If you buy a house for $150,000 you payment would be $536.82 per month + your taxes and insurance (usually about $3500 a year for taxes (local city taxes for schools and city government) and $1200 for insurance= 4,700/12= 391.00 per month, this goes into the escrow to pay taxes and insurance every year). So your payment would be about $927. The actual loan of $536.82 is divided into principal and interest... At the beginning of a loan more interest is paid than principal and as the loan goes though the years. principal increases and the interest decrees.

    So during the first year your payment will be as follows:

    Interest Principal

    416.67 120.15

    416.17 120.65

    415.66 121.16

    415.16 121.66

    414.65 122.17

    414.14 122.68

    413.63 123.19

    413.12 123.70

    412.60 124.22

    412.09 124.73

    411.57 125.25

    411.04 125.78

    So you will have paid $4,966.50 in interest + $3,500 for your taxes give you a $7,466.50 Write Off on your income taxes.

    Not a bad deal at all, just remember that every year that number on the interest will slowly decrease as the loan matures.

    On the homestead exemption, yes its your homestead if you live there. the local tax rate is lower for your home as opposed to an income property or rent house.

    Source(s): Commercial Realtor.
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  • Anonymous
    4 years ago

    Bought A House Tax Return

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  • Anonymous
    9 years ago

    The process is much more complicated than saying what you got back this year and that you claim 0 as that has little bearing on future taxes. Being a student gives you tax credits and owning a home sometimes give you deductions but you can't compare credits and deductions - it's comparing apples to oranges. You have 2 options on tax returns for deductions - using the "standard deduction" or "itemizing deductions" on Schedule A. You only itemize if the amount exceeds your standard deduction which for tax year 2010 was $5700 and for 2011 tax year will be $5800. What that means is if your mortgage interest, property taxes, medical expenses (limits on this one), PMI (a mandated mortgage insurance premium depending on how much you put down), charitable donations, and a few other misc expenses do not exceed $5800 you have no tax benefit by itemizing and you simple take the standard deduction of $5800. If they do exceed that amount you claim them on Schedule A which reduces your taxable income even more then the standard deduction would and therefore can reduce the amount of tax liability which can trigger a bigger refund - however it's possible that your education credits had already brought your tax liability to zero so more deductions will have no effect. Being a student you might have qualified for the refundable part of the AOC giving you back more than you paid in - house deductions can't do that. Also for 2010 you had the Making Work Pay credit of $400 which you won't have next year.

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  • Anonymous
    5 years ago

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    RE:

    Buying a house, how does that affect my tax returns?

    I am a first time homebuyer and am very confused on the process. I was wondering how buying a home affects my tax returns. Right now I am getting a $3,000 return from being a student and working full time. I am claiming 0. I am wondering if by buying a house if I would have to start paying in...

    Source(s): buying house affect tax returns: https://biturl.im/32Hfu
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  • 9 years ago

    You'll be able to deduct a bit of your property taxes and a bit off the interest you pay on a loan (mortgage) if you make any loan for the home.

    The amount is small when it's all said and done.

    Better get yourself a good book from your library or bookstore.

    Home Buying for Dummies or

    Buying your First Home - what you need to know (or something similar).

    These books are worth their weight in gold.

    The best money you will EVER spend in your life

    Note: If you need a mortgage, you will have to have 2 years of solid experience with the same steady salary. Good credit ratings (so make sure you pay your credit card bills in full each month). In the meantime, start saving up for that all-mighty 20% down payment to avoid that nasty PMI.

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