When your clients purchase their first home or a new home, they’re probably only thinking about fraction of the financial implications. They’re focused on real estate prices, closing costs, the expense of upgrades and remodeling, the cost of utilities in the new place and the cost of moving and, possibly, purchasing new furniture. What they’re not thinking about, yet, are financial implications like tax benefits that could save them thousands of dollars as year. Your clients probably don’t even know to ask you about the tax benefits they’re eligible for when they buy a first or new home, but that doesn’t mean they don’t need the help of their accountant to prepare for and adjust to the financial implications of this major life change.
Focusing on Finances, but Not Accounting
It’s not that homebuyers are jumping into ownership blindly, without considering the financial implications at all. In fact, one in five Americans surveyed in 2015 reported that they are delaying buying a home – first or otherwise – due to financial reasons, Accounting Today reported. Most likely, your clients have been saving and planning for homeownership for some time, so they may think they’ve got their financial bases covered.
In fact, research shows that 55 percent of taxpayers surveyed aren’t aware of the major tax benefits available to them after major life changes that include purchasing a new home. When your clients don’t know about the benefits available to them, they can’t take advantage of those credits and deductions – and that means their tax burden is higher than it needs to be.
Where an Accountant’s Experience Comes In
As an accountant, you, fortunately, do know that these tax benefits exist – and you can make your clients aware of which benefits apply to them.
For example, are your clients eligible to deduct the interest they pay on their mortgage from their income taxes? What about mortgage points, mortgage insurance and real estate taxes?
It depends on which rules were in place when they bought the home, how much the mortgage amount is, whether the house is their main home, what taxes are listed on the settlement sheet and other factors. Your clients will also need your guidance to find out whether it’s worthwhile for them to itemize their income tax deductions so they can take advantage of these benefits, or if, in their case, it makes more sense to take the standard deduction.
Since you’re not an accountant yet, it may seem like handling these responsibilities is a long way away. However, it’s important that you develop as much accounting knowledge as you possibly can now, while you’re still a student, as well as throughout your career during continuing education courses. The more you know about the tax benefits, eligibility requirements, financial options and regulations that accompany new home ownership and other major life changes, the better you can succeed at helping your clients make sound financial decisions.