What exactly is tax deductible when buying a house for the first time?
Real Estate Taxes
Each year, you can deduct your local property taxes on Form 1040 Schedule A. To find the amount you can deduct, check Form 1098 if you pay through an escrow account or check your records if you pay directly to the municipality.
Additionally, for the first year in your home, you should earn an even bigger tax reduction. If you reimbursed the seller for their prepaid real estate taxes, you can take those as itemized deductions as well.
If increased investment opportunity is one of the reasons for buying a home, then you’ll appreciate this benefit for your IRA. If you pull from your IRA to cover your down payment and other purchasing costs, first time home buyers do not have to pay the $10 penalty fee for early withdrawals.