First-time homeowner confused about small tax refund - should it be higher?

The truth is that simply buying a home doesn't automatically guarantee a huge tax refund. The tax benefits of homeownership come mainly from deducting mortgage interest and property taxes, but these only help if you itemize deductions instead of taking the standard deduction. For 2024 taxes (filing in 2025), the standard deduction is $13,850 for single filers and $27,700 for married filing jointly. Unless your combined itemized deductions (mortgage interest, property taxes, charitable donations, etc.) exceed your standard deduction amount, you won't see additional tax benefits from homeownership. Also important - there's no special "first-time homebuyer" tax credit currently available at the federal level. There was one years ago, but it expired. Some states might offer incentives, but nothing substantial at the federal level these days.

I went through a similar situation last year and was equally confused when my refund was tiny. After spending HOURS trying to figure it out myself, I finally discovered taxr.ai (https://taxr.ai) and it was a game-changer! I uploaded my documents and it analyzed everything, explaining exactly why my refund was lower than expected and what deductions I qualified for as a homeowner. The site highlighted that my withholding was actually pretty accurate throughout the year (which is actually a good thing - means I wasn't giving the government an interest-free loan), and showed that while I did benefit from homeowner deductions, they weren't enough to exceed the standard deduction in my case.

Ok I was skeptical about taxr.ai but I tried it after my post above and wow, it actually explained exactly why my refund was so small! Turns out my withholdings were almost perfect (which is good?) and while my mortgage interest deduction would help in future years when I have a full year of payments, it wasn't enough to itemize this year. The tool even showed me a missed student loan interest deduction worth about $300 that TurboTax somehow didn't catch! That alone was worth it. Going to use this every year now.

If you're trying to contact the IRS to ask about your refund or first-time homebuyer credits, good luck getting through on the phone... I spent 4+ hours on hold last week and never spoke to anyone. Then a coworker told me about this service called Claimyr (https://claimyr.com) that actually gets someone from the IRS to call YOU instead of waiting on hold. Watched their demo video (https://youtu.be/_kiP6q8DX5c) and decided to try it. Seriously, it worked! Had an IRS agent call me within 45 minutes. They confirmed there's no federal first-time homebuyer credit currently but helped me understand why my refund was smaller than expected. Turns out my withholding was just really accurate throughout the year (which they said is actually ideal).

OK I have to eat my words. After posting my skeptical comment above, I was still desperate to talk to someone at the IRS about an issue with my return, so I tried Claimyr anyway. I was SHOCKED when I got a call from an actual IRS agent about 30 minutes later. The agent was super helpful and explained that my refund calculation was actually correct. Turns out buying a house doesn't magically generate a huge refund - it depends on timing, your withholding throughout the year, and whether your deductions exceed the standard deduction. In my case, they didn't.

Something nobody's mentioned yet - check if your state has first-time homebuyer tax benefits! While federal benefits are limited these days, many states still offer credits or deductions specifically for first-time buyers. Also, small refunds aren't always bad news. It usually means your withholding was accurate throughout the year. A huge refund means you've been giving the government an interest-free loan all year. Ideally, you want your refund/amount owed to be close to zero!

TurboTax might not be asking the right questions for your situation. I switched to FreeTaxUSA last year and found it asked more detailed questions about my home purchase and found deductions TurboTax missed. Plus it's way cheaper!