Meritage Homes is a publicly traded builder that constructs single-family homes across the United States

Meritage Homes operates in multiple states and price ranges, from entry-level to luxury homes. The company builds new construction homes rather than selling existing properties, which means your purchase involves a new construction contract and a closing process different from buying a resale home. Understanding what Meritage offers and how it affects your taxes and finances is important before you sign a purchase agreement.

When you buy a Meritage home, you are purchasing directly from the builder. This means the builder handles the construction timeline, warranty, and closing process. Your tax situation changes depending on whether you are buying as a primary residence, second home, or investment property — and Meritage's financing options and incentives can affect what you owe at tax time.

Key Takeaways

  • Meritage Homes operates in multiple states with varying price points, so the homes available to you depend on your location and budget.
  • New construction purchases involve different closing costs and timelines than resale homes, and some costs may be tax-deductible depending on your situation.
  • Builder incentives, upgrades, and financing offers can affect your basis in the home and what you report on your tax return.
  • If you claim the home as your primary residence, you may be able to deduct mortgage interest and property taxes on Schedule A.
  • Keeping all closing documents, builder agreements, and upgrade receipts is essential for calculating your cost basis if you sell later.

How new construction purchases differ from resale homes

When you buy a Meritage home, the builder controls the construction schedule and completion date. You sign a purchase agreement that locks in the price and specifications, but the home does not exist yet. This means your closing date depends on when construction finishes, which can shift by weeks or months. During this time, you may be able to make changes to the home's features — flooring, countertops, paint colors — but changes often come with additional costs.

Closing costs for new construction are similar to resale homes but include some different line items. You will pay for a home inspection, appraisal, title insurance, and loan origination fees. However, the builder may cover some costs that a resale seller would not, such as builder warranty coverage or certain closing costs as part of a sales incentive. Ask your Meritage sales representative for a Closing Disclosure at least three business days before closing so you can review all costs in advance.

One key difference: the builder is responsible for any defects in construction during the warranty period, typically one year for most items and longer for structural issues. This is different from buying a resale home "as-is" from a private seller. Keep all warranty documents and builder contact information in case you need repairs after closing.

Builder incentives and how they affect your taxes

Meritage and other builders often offer incentives to move homes faster — price reductions, paid upgrades, closing cost information, or financing rate buydowns. These incentives can lower your out-of-pocket cost at closing, but they affect your cost basis in the home for tax purposes.

Your cost basis is what you paid for the home, including the purchase price, closing costs you paid, and certain improvements. If the builder pays for upgrades or closing costs as an incentive, those amounts reduce your basis, not your out-of-pocket cost. For example, if you negotiate a $10,000 price reduction and the builder covers $5,000 in closing costs, your basis is the original price minus the $10,000 reduction, not the amount you actually paid at closing.

This matters when you sell. If you sell the home for a profit, you calculate your gain by subtracting your basis from the sale price. A lower basis means a higher taxable gain. Keep all paperwork showing what the builder paid for and what you paid for — this is your proof if the IRS questions your basis calculation later.

Mortgage interest and property tax deductions for primary residences

If you buy a Meritage home as your primary residence, you may be able to deduct mortgage interest and property taxes on Schedule A of your tax return — but only if you itemize deductions instead of taking the standard deduction. For the 2024 tax year, the standard deduction is $14,600 for single filers and $29,200 for married filing jointly. If your mortgage interest plus property taxes plus other deductible items (charitable donations, state income taxes up to $10,000) exceed the standard deduction, itemizing saves you money.

Mortgage interest is deductible only on loans up to $750,000 of principal (or $1 million if the loan originated before December 16, 2017). Property taxes are deductible up to $10,000 per year, combined with state and local income taxes. These limits explore regardless of how much you actually paid.

You cannot deduct the principal portion of your mortgage payment, only the interest. Your mortgage statement or lender's year-end Form 1098 shows how much interest you paid in the year. Keep this form with your tax records.

Capital gains tax if you sell the home later

When you sell a Meritage home, you may owe capital gains tax on the profit. However, if the home was your primary residence for at least two of the five years before the sale, you can exclude up to $250,000 of gain if you are single, or $500,000 if you are married filing jointly. This exclusion applies once every two years.

To calculate your gain, subtract your cost basis from the sale price. Your basis includes the purchase price, closing costs you paid, and the cost of permanent improvements (a new roof, updated electrical system, finished basement). It does not include routine maintenance or repairs. If you made significant upgrades during ownership, keep receipts and invoices — they increase your basis and lower your taxable gain.

If you sell at a loss, you cannot deduct the loss on your personal tax return. However, if you convert the home to a rental property later and then sell it, the rules change. Consult a tax professional before making that decision.

Keeping records for your purchase and future sale

From the moment you sign the purchase agreement with Meritage, save every document. This includes the purchase agreement, all change orders for upgrades, the Closing Disclosure, the final walkthrough inspection report, the deed, the title insurance policy, the mortgage note and deed of trust, and the Form 1098 from your lender each year. These documents prove your cost basis and protect you if questions arise later.

If you make improvements after closing, keep receipts and invoices. Improvements that add value to the home (new HVAC system, roof replacement, kitchen remodel) increase your basis. Repairs and maintenance (fixing a leak, repainting, replacing worn carpet) do not. The difference is whether the work extends the life of the home or restores it to its original condition.

Create a folder — digital or physical — labeled with the property address and closing date. Include a copy of your cost basis calculation. When you eventually sell, you will have everything you need to report the transaction accurately to the IRS.

Second homes and investment properties

If you buy a Meritage home as a second home, you can still deduct mortgage interest and property taxes if you itemize. However, you cannot use the primary residence capital gains exclusion when you sell. You will owe capital gains tax on any profit, with no $250,000 or $500,000 exclusion available.

If you buy a Meritage home as a rental property, the tax rules are different. You can deduct mortgage interest, property taxes, insurance, maintenance, utilities, and depreciation. However, you must report rental income and expenses on Schedule E, and depreciation recapture may explore when you sell. Rental property taxation is complex — work with a tax professional to set up your records correctly from the start.

Frequently Asked Questions

Can I deduct the cost of upgrades I choose at a Meritage home?

Upgrades chosen during construction are part of your purchase price and increase your cost basis. You cannot deduct them as a separate expense. However, if you later sell the home, the higher basis lowers your taxable gain. Keep all upgrade invoices to prove what you paid.

What happens to my mortgage interest deduction if I refinance after buying a Meritage home?

Your mortgage interest remains deductible as long as the loan is secured by your primary residence and the principal does not exceed $750,000. Refinancing does not change this, but the amount of interest you pay each month decreases over time as you pay down principal. Your lender will send you a new Form 1098 each year showing the interest paid.

Do I have to report the builder's closing cost information as income?

No. Closing cost information from the builder is treated as a price reduction, not taxable income. It lowers your cost basis instead. However, if the builder offers a cash rebate separate from the home purchase, that may be taxable — ask your Meritage sales representative to clarify how any incentive is structured.

What if I sell my Meritage home within two years of buying it?

You will owe capital gains tax on any profit because you do not meet the two-year ownership requirement for the primary residence exclusion. The gain is calculated as the sale price minus your cost basis. If you sold at a loss, you cannot deduct it on your personal return.

Should I keep the builder's one-year warranty documents?

Yes. Keep all warranty documents, the builder's contact information, and records of any repairs completed under warranty. These documents support your cost basis if you later claim that defects reduced the home's value, and they are useful if you need to contact the builder years later about a covered issue.