Common Tax Mistakes Made By First Time Home Buyers

Tax season is upon us!  For home buyers, including first time home buyers this is a good thing!  As a homeowner you get more tax benefits than a renter. However, it's easy to make mistakes when filing your taxes and missing some of the things you could be taking advantage of.  Here are some of the most common mistakes first time home buyers make...

FORGETTING TO KEEP TRACK OF HOME IMPROVEMENT EXPENSES

Perhaps you bought a fixer-upper and have been investing a lot of money into home improvement projects.  Maybe you did some appliance updating and replaced old ones with energy efficient appliances. All of these things may be eligible for tax credits.  Make sure to keep detailed records and receipts for these to refer to when filing your taxes.

FILING FOR THE WRONG YEAR!

This may seem like such an oblivious thing, but many homeowners file for the wrong year.  For example when you file in 2016, you're actually filing for the 2015 tax year. If you file for the wrong year, the amounts will be wrong and you might end up with a lower than expected tax refund!

DEDUCTING THE WRONG ESCROW AMOUNT

If you put money into your escrow account throughout the year, make sure to double check the amount you deduct.  It's easy to list the full escrow balance, when not all of that is used to pay taxes. Find out your exact amount of taxes paid from escrow and use that amount.

FORGETTING TO DEDUCT PRIVATE MORTGAGE INSURANCE

For most first time home buyers paying for PMI is generally part of your mortgage.  The one good thing about this is most can use the private mortgage insurance as a write-off on your taxes.  

NOT KEEPING TRACK OF HOME RELATED PAPERWORK

A lot of paperwork and documentation comes with buying and maintaining a home.  It's important to have a safe place to file all of this, especially for tax purposes.  If you are writing things off such as home repairs, energy tax credits and home office deductions then you need to have all the paperwork to back it up.  Not only is this good for your own records but you'll be so happy you have it if the IRS decides to audit you! Make an organized file system and keep important things related to your home and taxes.  If you aren't sure if you should keep it or toss it, maybe err on the side of caution and file it. If it comes to an audit, it's better to have too much than be scrambling for something you got rid of!

As with anything tax related, it's best to consult a professional with questions or if something is unclear.  A tax professional can help you, especially when something big has happened like buying your first home.

The above information was taken from two sources, please refer to them for further information.  Five Tax Mistakes New Homeowners Make on realtor.com and 7 Rookie Real Estate Mistakes on trulia.com