Buying early in the Calendar Year | taking full advantage of tax benefits

Advantage of buying early in the Calendar Year
If you have decided that 2008 will be the year you join the ranks of homeowners, then you should consider doing it as early in the year as possible, because delay has one certain cost.  For every day that passes after January 1, you will find it more difficult to take full advantage of the tax benefits of ownership. This results from the way the federal income tax system (and most state income tax systems) works for those who itemize deductions.  Buying a home is typically what turns short-form 1040A and 1040EZ filers (who take the standard deduction) into long-form 1040 itemizers. 

To get the benefit of deductions for home mortgage interest and property taxes, two of the largest deductible items for most tax filers, you must first exceed the standard deduction.  For 2008, the standard deduction will be $10,900 for married persons, $5,450 for singles and $8,000 for single heads of household.  Deductible items that are typical and common to both homeowners and renters include state and local income taxes, personal property taxes and charitable contributions.  Together, these items are rarely enough for taxpayers to benefit from itemizing.  However, adding mortgage interest and real estate taxes usually lifts the total itemized deductions above the standard deduction amount, making it advantageous to itemize.  Unfortunately, many first-time buyers still wind up taking the standard deduction during their first year as homeowners.  If you purchase late in the year, your  mortgage interest and real estate taxes may be insufficient to make you an itemizer. 

As a result, you essentially lose the tax benefits of homeowner-ship during the first year, whether for a few weeks to several months.  However, if you purchase your home early in January, you will get nearly a full year’s worth of mortgage interest and property tax deductions and should have no trouble exceeding the standard deduction and, thus, maximizing your tax benefits.  That could be worth real money to you, so don’t wait, especially in view of the current market’s supply of inventory and the very low interest rates.
© 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Real Estate of VA, Inc.

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