For Tax Purposes, What Is The Best Time To Buy My House?

Sandy Gadow - For Tax Purposes, What Is The Best Time To Buy My House?: "Knowing when to close your real estate purchase can work to your advantage at tax time. You may want to consider postponing your December closing until January of next year, if it will benefit you on your tax return. You would make this determination in several ways.

First, you need to review your tax liabilities for the current tax year with your tax accountant or tax preparer and see if taking additional deductions in the current or future year would be most beneficial to you. Next, you will need to understand which items in your closing will be tax-deductible and which items will added to the value of the property. Keep in mind that if you close on December 31 rather than on January 2 (or the first business day after the New Year), you will be permitted to take the allowable deductions for your home purchase in the year purchased, even if your closing occurs on the last day of the year. If you want to increase your deductions for the coming year, then you may want to choose to close in January. The normal allowable home purchase deductions will be the points, interest, and property taxes which you pay.

If you will be obtaining a mortgage on the property and will be paying points, this expense will be an allowable tax deduction. A 'point' is the fee which represents 1% of your loan amount and may be charged by your lender or mortgage broker. The number of points you pay may vary from lender to lender. Points are referred to as a 'nonrecurring closing cost,' and are fully deductible in the year paid. You should be aware that points on a refinance loan are not deductible in the year paid, but rather must be amortized and deducted over the life of the loan. There are certain other exceptions, such as the loan must be secured by your main home, but generally, "
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