Taxes and Your Purchase

 
Taxes associated with buying and selling of real estate have the potential to place a large burden on your housing budget. Thankfully, the government, in partnership with the Internal Revenue Service, has put in place several tax breaks and benefits designed to ease the tax burden associated with purchase and sale of real estate.

The Purchase

According to the IRS, you may be able to deduct interest from your mortgage in the year that it is paid including any daily interest you paid the day of settlement. This can also include in most cases the loan discount points and origination fees, no matter WHO paid them. You can see if this applies to you by checking lines 801 and 802 of your HUD-1. So, if the seller paid your closing costs as an incentive to purchase, according to the IRS, you still get the benefit of the deduction which can usually amount to quite a bit of money.

Interest on your loan

In the year that it's paid, you can generally deduct the mortgage interest on a loan which was used to purchase or make improvements on your home. Because most loans are set up with the bulk of the interest up front, this can really help out in the beginning years. It's basically a subsidy to create incentives for homeownership. What a great opportunity!