Tax Deductions for Homeowners

That dreaded time of the year is quickly approaching – tax time.  It is time to gather W2’s, 1099’s, receipts, and bank statements.  If you own a home, you are most likely entitled to substantial tax breaks.

 

First thing to look at is your mortgage interest paid at settlement. Take a look at your closing statement; one item that’s generally listed there is home mortgage interest. On a mortgage of up to $1 million, you can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). This amount should be included in the mortgage interest statement provided by your lender.  Did you pay points in order to obtain your home mortgage? These fees are included on the income tax deductions list and can be deducted as long as they are associated with the purchase of a home. If you refinanced your home, these points are still deductible, but it must be done over the life of the mortgage,

 

If you sold a home in the past year, you may be able to reduce your income tax by the amount of your selling costs. These costs can include things such as repairs, title insurance, advertising expenses and broker’s fees. The IRS only allows the deduction of repair costs associated with selling if the repairs were made within 90 days of the sale. It’s also crucial that the repairs were made with the intent of improving your home’s marketability. Selling costs are deducted from your gain on the sale.

 

If you use a portion of your home exclusively for the purpose of an office for your small business, you may be able to claim a deduction on your taxes for costs related to insurance, repairs and depreciation. You may only claim this deduction if the space within your home is used exclusively and regularly as either your principal place of business or a place where you meet and deal with customers or patients. You may also be able to take advantage of this deduction if a portion of your home routinely is used for storing items (product samples, inventory, etc.) used in your business.

 

You may be able to deduct the premiums paid for private mortgage insurance for your principal residence and for a non-rental second home.  The deduction begins to phase out once your adjusted gross income reaches $100,000.00.  In general, you can deduct the premiums paid for the current year only.  A qualified tax adviser can provide information about rules for mortgage insurance provided by the Federal Housing Administration, Department of Veterans Affairs, and Rural Housing Service.

 

Source: Eight Tax Breaks for Homeowners.” Fox Business. Web. 17 Feb. 2013.

 

 

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