Important Tax Tips for Homeowners
If you’re a homeowner, you’ll be glad to hear that you’ll see some of your money back in the form of tax breaks or returns! However, your taxes may get more complex than a simple “EZ” form since there’s the added component of itemization, so it may require you to hire a professional tax accountant or CPA to help you fill out Form 1040 or Schedule A for your private residence, mobile home, single-family residence, town house, condominium, or cooperative apartment. Last year, the standard deductions were $6,100 for single Americans and $12,200 for those who were married and filing jointly – so make sure that any itemized deductions are higher than those amounts in order to claim them.
If you run a business from home, you may be able to deduct some of your homeowners insurance costs.
Consider this — the two biggest costs associated with being a homeowner will probably also yield the biggest tax breaks during tax season. Since the bulk of your monthly mortgage payment is interest, which is fully deductible, you will be able to subtract the amount of interest you pay from these payments, as well as property taxes from your total annual income, which will directly affect the amount of income taxes you owe.
It’s important to note that even secondary residences – including RVs, boats, and motorhomes can be claimed if they have sleeping, restroom, and cooking claim the mortgage interest tax deduction even if you rent it out most of the year, as long as it’s 10% of the number of days that you rent it out, otherwise the IRS may tax your interest deduction by identifying it as a residential rental property. The only exclusion on this interest tax deduction for homeowners is that it’s limited to under $1.1 million in mortgage debt that can be deducted for tax purposes, for either one residence or two.
Also, even if you didn’t just purchase a new home, you can still claim up to $100,000 of interest borrowed on a home equity loan or line of credit, but you had to have used it on repairs or work for your primary residence to claim it all in that year. You can also claim interest and points from refinancing. And if you were required to have private mortgage insurance (PMI), not to be confused with homeowners insurance that covers damages or losses due to a fire or accident, the interest from those payments can also be deducted.
In order to be sure if you’re able to deduct the local and state property taxes from your federal tax returns, enlist the aid of a tax accountant. These taxes would have to be itemized so it’s more work, however, for lower-income Americans it’s worth looking into because there may be special property tax benefits. Also, it’s important to include any taxes that you may have reimbursed the seller for, these are taxes that the seller paid before you became the homeowner, you’ll have to look this amount up on the settlement sheet since you won’t get a 1098 listing it.
In summary, other ways to capitalize on being a homeowner when filing your taxes are:
• Claiming private mortgage insurance
• Itemizing local/state property taxes
• Claiming interest from a line of credit or home equity loan
• Claiming points you paid when purchasing the home
• Claiming any medically required home improvements
• Claiming Green or energy efficient home renovations
• Claiming moving expenses (if you moved more than 50 miles from your old home)
Lastly, if you were a seller, there are advertising and real estate broker fees that are costs that you can claim on your return as well as for title insurance. You can also claim certain repairs that you made on your house before selling to reduce your capital gains on the sale.
The information given here is not intended as legal advice – be sure to consult a tax professional for your specific case.
Are you confused about deductions? Feel free to share your thoughts and experiences in the comments section below.