With tax time looming, many homeowners are looking for ways to reduce their tax liability and find additional tax breaks. Anyone who owns a home, whether it’s a small townhouse or an expansive estate, may be entitled to these home-related tax deductions or credits:
Mortgage Interest
The IRS states that "in most cases, you can deduct all of your home mortgage interest." How much of your mortgage interest eligible depends on the mortgage date, amount and how the mortgage proceeds are used.
Mortgage Insurance
New home-buyers are usually required to purchase additional private mortgage insurance (PMI). Part of these insurance payments may be deductible if you are eligible.
Multiple Property Owners
If you own more than one property, the mortgage interest on your second home may also be deductible. There are some restrictions on this deduction depending on the use of the property.
Mortgage Points
Mortgage points, also known as loan origination fees or discount points are a fee that lenders charge borrowers to originate a loan. These are typically paid during or prior to the real estate closing. If you meet certain requirements, you may be able to deduct these points from your yearly taxes.
Property Taxes
If you are a homeowner, you are probably familiar with property taxes paid each year. In most cases, property taxes are deductible. Property taxes should be based on the assessed value of your home, and charged uniformly against all property in the jurisdiction that you reside in. There are however some restrictions.
Home Improvements
While most home improvements are not tax deductible, there are some deductions on energy related upgrades as well as medical related renovations that you may be able to claim depending on the scope of these renovations. Energy-saving improvements like solar hot water heaters, wind turbines and solar energy or alternative energy installations are deductible as long as the upgrades are made on your primary residence.
There are a number of incentives and tax deductions for homeowners, but it is always best to consult with a certified tax expert to answer any questions you may have regarding your eligibility for any of these deductions or credits.
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Yaffe Real Estate does not advise on any personal income tax requirements or issues. Use of any information from this site or any other website referred to is for general information only and does not represent personal tax advice either express or implied. You are encouraged to seek professional tax advice for personal income tax questions and assistance.
