Did you know that buying a home in Kennett Square, PA, also gives you some government benefits when you file your taxes? While most first-time homebuyers don’t realize it, there are ways to reduce your tax liability through federal tax credits.
These homebuying financial benefits in Kennett Square can make a big difference in your bottom line when it comes time to pay your annual taxes. While you should talk to a tax professional about your specific situation, Penn Street Mortgage is here to help give you the information you need to navigate the home loan process with ease.
Please note that you should talk to a professional tax preparation service to get the full details, but here are some tax benefits to buying a home.
Federal Homebuyer Tax Benefits
If you’re a first-time homebuyer, there are some great ways to reduce the amount of tax you have to pay by leveraging federal tax credits.
First-Time Homebuyer Credit
There are already a lot of expenses that come with owning a home for the first time. Luckily, with the first-time homebuyer credit, you can decrease your tax bill and make it easier to manage the costs that come with purchasing a home. This tax benefit was created specifically to encourage more people to buy homes and provide financial relief to new homeowners. While the specific terms and availability of this credit can vary depending on your personal income tax returns and when you purchased a home, it’s worth exploring whether you qualify.
Mortgage Interest Deduction
If you’re purchasing your first home, you can explore a specific tax credit that allows you to subtract the interest amount paid on your mortgage from your taxable income. This tax deduction can help you generate some serious savings over the length of your mortgage, particularly during the early years of your home loan when the amount you’re paying in interest is higher than other years.
Pennsylvania-Specific Tax Deductions in Kennett Square
In addition to federal benefits, Pennsylvania offers several state-specific programs designed to make purchasing real estate more affordable for residents of Kennett Square and the surrounding areas like Chester County.
Homestead Exemption
The Homestead Exemption is a property tax relief homeownership program designed to help you decrease the taxable value of your primary residence. It ultimately reduces property taxes and provides continuous financial relief.
To qualify, you have to fill out an application and confirm that your home is your primary residence. The application process is pretty straightforward, and once you’re approved, the exemption continues as long as you keep the home as your primary residence. For many homeowners, this means significant savings over time and can make it easier to manage annual property tax bills.
Property Tax/Rent Rebate Program
The Property Tax/Rent Rebate Program is another potential opportunity to get tax savings for Pennsylvania homeowners. This program gives tax rebates to eligible homeowners based on their income and how much property taxes are paid. If you meet the income requirements, you could receive a rebate that helps offset the cost of property taxes.
This program is particularly beneficial for older adults, widows, and widowers, as well as those with disabilities who might have more limited income and own a home. With this program, you can get substantial financial relief when it comes time for your annual tax return preparation. You can apply every year, and the rebate amount will vary based on how much income you earn and the amount of property taxes or rent paid.
First-Time Homebuyer Savings Account Program
Pennsylvania has a program called the First-Time Homebuyer Savings Account Program that helps potential first-time homebuyers save up the money needed to buy their first home. If you’re hoping to save up for a home, you can put money into a special savings account that has a high annual percentage yield (APY). The interest you earn on that money might be tax-deductible, which can help you save even more. This program is meant to make it easier for people to save up for a down payment and other costs when buying a home.
PHFA Mortgage Programs
The Pennsylvania Housing Finance Agency (PHFA) provides several different mortgage programs that help make homeownership more accessible. While most of these programs focus on helping with financing and the loan program associated with buying a home, it’s a government program that can help you get into your new home.
Some of the benefits from the PHFA mortgage programs include more competitive interest rates, down payment and closing cost assistance, and special home loan options if you’re buying a home in a specific area. At Penn Street Mortgage, we can help you explore your options and see if you qualify for any of the PFHA programs that could make buying your first home more affordable.
Tips for Maximizing Kennett Square Homebuyer Tax Benefits
To fully leverage the tax benefits available to you as a homeowner in Kennett Square, consider implementing the following strategies:
- Keep good records – It’s really important to keep good records of all the money you spend on your home so you can potentially get tax benefits. This means you should hang on to things like papers from the bank about your mortgage, bills for property taxes, and any receipts you get for fixing up your home. By keeping good records, you can make it easier to get some money back when filing your taxes!
- Hire a professional tax service in Kennett Square, PA – Hiring a tax professional can make a big difference in how much you pay in taxes. Similar to how Penn Street Mortgage can give you personalized advice on your home loan options, they can show you how to make the most of tax benefits and stay compliant with the tax laws.
Discover the benefits of being a homeowner in Kennett Square, PA!
At Penn Street Mortgage, we’re here to make sure you get the most out of your home-buying process. Give us a call to get started and we can help you get into your dream home with a great mortgage.