also doesn’t have to be the future homeowner; a person under the age of 59½ can qualify for the tax exemption if they are helping a child, grandchild, parent, or another immediate family member purchase their first home. The money withdrawn from either a traditional or Roth IRA must be used within 120 days, or it becomes subject to the penalty so be sure to plan ahead. Depleting your retirement savings is a risky business as it might, over time, be more cost-effective to keep the money earning interest rather than applying it to your down payment. Speak to a financial advisor for help with your specific situation!
HOMEOWNER TAX BREAKS
• The Mortgage Interest Deduction. This is one of the most beneficial tax breaks that homebuyers can take advantage of, whether they are first-time buyers or otherwise. The IRS allows you to deduct from your taxable income the interest you pay your lender. Home mortgage interest is one of the largest deductions for those who itemize. Lenders will report your mortgage interest on a 1098 form sent out annually. The Mortgage Interest Deduction (MID) is valid for mortgage debt up to $750,000 for married couples or $375,000 if you are filing separately. Home buyers can receive a large benefit in the first years after buying, as the first repayments have the highest interest. To claim the MID benefit, homebuyers will have to file an itemized tax return. • Mortgage Points. Discount points (also known as mortgage points) are fees paid directly to the lender at closing in exchange for a reduced interest rate. The cost of discount points is equivalent to 1% of your mortgage ($1,000 for every $100,000). Discount points involve
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