by A.W. Berry

Created on: December 21, 2009   Last Updated: January 19, 2010

Tax relief for first time home buyers can be a much welcomed benefit of owning a home. This is partially due to the large expenses that come with buying a home for the first time. For example, closing costs, furnishing, repairs, moving expenses, home insurance etc. can add up to thousands of extra dollars in the first year of ownership.
                          

Income tax deductions and credits can help reduce the financial burden for first time home buyers.  However, there are also some taxes that are unavoidable such as property tax that is also a significant cost for first time home buyers. Several areas of taxation affect first time home buyers; some of these are listed and then discussed below.

I: FIRST TIME HOME BUYER TAX CREDIT THROUGH APRIL 30, 2010

Perhaps the most beneficial aspect of buying a home is capital appreciation, but until April 30, 2010 another incentive for first time home buyers exists. This incentive is the first time home buyers tax credit. This credit can be as high as $8,000.00 which in many cases is a recovery of sizable sunk home costs such as down payment. There are several requirements for this program such as purchase date, income amount, and residential history. For more information on this program please visit the first time home buyers tax credit information at Federal housingtaxcredit.com or the following articles on the first time homebuyer tax credit.
 
II:  MORTGAGE INTEREST DEDUCTIBLE ON SCHEDULE A

Many home buyers buy homes to make more productive use of money that is paid in rent as it builds net worth over time which helps with credit, financial stability, raising a family etc. When a home is purchased with a mortgage the interest paid on that mortgage for any given tax year may be deducted from taxable income using an IRS Schedule A. This may help lower the total taxes due to the Federal Government.

III: CAPITAL GAINS TAX EXCLUSION

In the 2009 tax year, up to $250,000 of capital gains can be excluded from taxable capital gains for single tax filers on primary residences that qualify for the exclusion. Among the rules of qualification are residence within the home for at least 2 of the previous 5 years with any depreciation from business use of the home deducted. For more information on this capital gains exclusion for home owners IRS publication 523 may be of assistance.

IV: FHA

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