I bought my first house; how does this change my taxes?
Updated: Jul 8, 2022
"I bought my first house; how does this change my taxes?"
Depends on whether you're married or sharing the house expenses or buying alone. If you bought the house alone, and the local property taxes are relatively high, and you paid mortgage interest and maybe mortgage insurance, then buying your first house will reduce you federal tax liability only. (This assumes also that your yearly income is less than $100,000.)
If you're single but bought the house with a friend or you're married, then the expenses for buying a new house likely won't be enough to affect your federal tax liability.
This was not the case before 2018. Before the new tax law, having paid local property taxes and mortgage interest on a house would have increased your itemized deductions and decreased your federal income tax liability. After the new tax law, expenses related to buying a new house must be relatively high (think $7,000 for property tax, $5,000 for mortgage interest, $5,000 for mortgage insurance) and/or those expenses must be combined with relatively high charitable donations (think another $5,000).
On the other hand, if you're self-employed, and working out of your new house, then buying your first home may help reduce taxes more than renting. That is, if you're paying more to own the house than to rent your previous living quarters. You report theses expenses when figuring the home-office deduction against your self-employment income.