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Buying your first home can be expensive — the down payment and closing costs alone can run you tens of thousands of dollars.
The good news? There are more than 2,500 grant and loan programs nationwide that can help make your home purchase more affordable, according to a report by the Urban Institute. Even better, you may qualify even if you’ve owned a home in the past.
While the Obama-era first-time homebuyer tax credit ended in 2010, take a look at how state-level tax credits and other programs can help first-time homebuyers.
Who qualifies as a first-time homebuyer?
Aside from people who have never owned a home, the Federal Housing Administration says first-time homebuyers can also include:
- Anyone who hasn’t owned a principal residence in the last three years
- A single parent or displaced homemaker who has only shared ownership with a spouse while married
- Anyone who has owned a home that’s not permanently connected to a foundation
- Anyone who’s only owned property that didn’t conform to state, local or model building codes (and that can’t be fixed to comply with those codes for less than the cost of a new residence)
For example, you may qualify as a first-time homebuyer if you’ve only owned an investment property in the past, or your principal residence is a mobile home.
If you’re considering a home purchase, be sure to shop around and compare multiple lenders. Credible makes this easy — you can compare loan options in as little as three minutes.
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How can I find first-time homebuyer tax credits for my state?
Although homebuyers can no longer claim the federal first-time homebuyer credit, you’ll likely find similar programs locally. Some states also offer zero-interest loans and grant money to put toward the costs of buying a home, like a down payment.
Many first-time homebuyer programs offer tax benefits in the form of mortgage credit certificates (MCC), which convert some of the mortgage interest you pay into a federal tax credit. The tax credit is usually capped at $2,000, and it’s nonrefundable.
Keep Reading: Programs for First-Time Homebuyers: Down Payment Assistance and More
What other tax benefits can I take advantage of?
First-time homebuyers can take advantage of the tax benefits that apply to all homeowners. Some of these benefits are deductions, which reduce your taxable income, while others are credits, which reduce the actual tax you owe dollar for dollar.
Mortgage insurance deduction
While you can’t deduct homeowners insurance premiums, you may be able to deduct a different kind of insurance — mortgage insurance premiums — if you itemize on Schedule A.
The tax break applies to any mortgage insurance you paid, whether it was for a conventional loan or one backed by a government agency, such as an FHA loan. You can also deduct the funding fee from a mortgage backed by the Department of Veterans Affairs.
Learn More: FHA Loan Requirements and Qualifications
Mortgage interest deduction
The mortgage interest deduction allows you to deduct any mortgage interest on your federal income tax return. To claim the tax break, you’ll need to itemize your deductions on Schedule A.
Married joint filers can claim interest paid on a mortgage up to $1 million as long as the loan was taken out before Dec. 16, 2017. If you bought your home after that date, you may deduct interest on mortgage debt up to the first $750,000 ($375,000 if you’re single or filing separately).
The state and local tax deduction, or SALT, allows taxpayers to deduct money paid to state and local governments for income or property taxes. You may deduct up to $10,000 of state and local taxes from your federal taxable income, as long as you itemize on Schedule A. Check Out: How to Buy a House: Step-by-Step Guide If you’ve upgraded your home with energy-efficient improvements, you may be able to net tax savings worth several thousand dollars. The residential energy efficient property credit is available to homeowners who install: If you’re a first-time homebuyer looking to secure a mortgage, be sure to shop around and compare multiple lenders. You can do this easily with Credible. Credible lets you compare loan options with our partner lenders — all without having to leave our platform. Keep Reading: Everything You Should Know Before Taking Out a Tax Refund AdvanceProperty tax deductions
Renewable energy tax credits
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