However, any withdrawn funds must be used within 120 days, and tapping into retirement savings should be carefully considered. Speak with a financial advisor to weigh the long- term implications against the immediate benefits.
Tax Benefits for Homebuyers
Homeownership comes with several tax advantages that can save you money annually. Here are some of the most beneficial deductions and credits:
1. Mortgage Interest Deduction (MID) n (MID)
One of the biggest perks of homeownership is the ability to deduct mortgage interest from your taxable income. • Valid for mortgage debt up to $750,000 (or $375,000 for married couples filing separately). • Most impactful in the early years of homeownership, as a larger portion of payments goes toward interest. • Requires itemized tax returns to claim the deduction. 2. Mortgage Points If you buy discount points to reduce your loan’s interest rate, the cost is tax-deductible in the year you paid them. Each point typically lowers your interest rate by 0.25%, making this a valuable upfront investment.
3. Mortgage Credit Certification (MCC)
This IRS-backed program offers a tax credit for a portion of the mortgage interest paid, helping lower-income buyers qualify for loans. • Can provide a credit of up to 30% of the interest paid. • Requires an MCC issued by local authorities, often coordinated through your lender. 50
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