If you are thinking about building a custom home or have already built one, you should know there are several tax breaks available. These financial benefits are provided to first-time homeowners as well as repeat owners.
Document your new home costs in detail and you will be able to write off some of the expenses on your taxes. These deductions must be itemized so be sure to keep track of all those receipts, agreements and other paperwork relating to the construction of your new home. The IRS permits the deduction of the amount paid for real estate taxes when constructing a new residence. These taxes have to be paid according to the property’s assessed value. You can also write off the money paid for state/local income taxes or local/state general sales tax. Selecting the state income tax typically allows for a larger deduction yet building a new home will incur substantial sales taxes for building materials that can be written off, so be sure to crunch those numbers.
Mortgage Insurance Premiums and Mortgage Interest
A new homeowner who made a down payment amounting to less than 20 percent of the residence’s value will likely be required to have mortgage insurance. The IRS allows for this premium to be written off. You can also deduct mortgage interest paid on your mortgage loan throughout the tax year if it is secured by your primary residence/second home.
First-Time Home Buyer Credit
The IRS offers a tax credit to those who construct a new house for the first time. The terms and amount of the tax credit differ each year.
Interest on the Construction Loan
Itemize your deductions and you will be able to deduct the interest paid on your construction loan. The interest paid during the first two years of the loan is deductible. This deduction is allowed if the constructed residence is your primary/secondary residence. It is capped at the first $1 million of loaned money.
State Sales Tax
State sales tax paid when buying the home’s construction materials can be deducted. However, the total of these taxes must exceed the amount of the state and local income tax. It is also important to note one cannot use both the local income tax deduction along with the state income tax deduction. The new homeowner must choose between the two.
Doors, Skylights and Windows
Tax credits are provided to homeowners who invest in “green” home materials that have the Energy Star® label. One can deduct upwards of $1,500 of the cost of skylights, windows and doors that adhere to the energy-efficiency standards dictated by the Department of Energy.
Petros Homes is Ready to Build the Home of Your Dreams
If you are interested in a custom home or a move-in-ready home for sale, Petros Homes is at your service. We have built more than 2,000 custom new homes across the greater Cleveland area. Our home builders are the best in the business. Reach out to us today at (440) 546-9000 or email@example.com to get the ball rolling on your new home.