Timing of Home Purchase

Owning a home is one of the best things you can do to reduce your taxes. Congress would like to see most Americans own homes, and that is why you can deduct many home-related expenses, including yearly mortgage interest, points, and real estate taxes. If you are planning to buy a home and cannot wait to start utilizing those homeowners deductions, keep in mind that depending on the timing of your home purchase you may not be able to use those deductions.

Buying your home early in the year generally increases the likelihood that you'll be able to deduct your mortgage interest and property taxes in the first year. Mortgage interest and points are deductible as itemized deductions on Schedule A. If you buy your home late in the year, your itemized deductions may be less than your standard deduction simply because you've only made a few months' payments. In that case, you're better off with the standard deduction even though you cannot deduct your interest or taxes.