Tax season is here and now it is time for you to get the most out of all the hard work you contributed last year. If you’re a current homeowner, I have some good news for you; tax breaks are available. You can deduct many home-related expenses, but make sure to consult with a tax advisor to ensure you get all of the tax breaks that are available to you.
Here are possible tax deductions for homeowners:
1.) Mortgage Interest: This is defined as any interest you pay on a loan secured by your main home or second home. These loans include a mortgage to buy your home, a second mortgage, a line of credit, and a home equity loan. It is very important for you to note that personal loans and the interest you pay are likely to not be deductible.
- Vacation Homes – Owning a vacation home can be that second home used to deduct some of your costs.
2.) Points: are prepaid interests that are paid to obtain a home mortgage. If you bought or refinanced your home after January 1, 2007 and have an adjusted gross income that falls under $110,000, then you are eligible for the points deduction.
3.) Private Mortgage Insurance (PMI): If you made a down payment of less than 20% on your home then it is very possible that you are paying on a PMI which protects lenders against loan default.
4.) Enhancements for the Home: Even though you can’t claim your purchases, it is advised that you keep all of your receipts from enhancements to your home. This can ultimately improve your homes resale worth and decrease potential taxable gain.
- Health-related enhancements – Did you know that any enhancements made to your home for medical reasons can be deducted from your taxes? The one thing that you need to make sure is that the enhancements don’t change the value for the home. If has to be made clear that these adjustments were made for a chronically ill or disabled person.
- Energy-efficient enhancements – A one-time federal tax credit of 10% of the cost of qualifying geothermal heat pumps, solar water heaters, solar panels, small wind turbines, or fuel cells placed in service for an existing or new construction home through December 31, 2016 may be available to you to deduct.
5.) Real Estate and Property Taxes: There are four types of deductible non-business taxes:
- State, local and foreign income taxes
- State, local and foreign real estate taxes
- State, and local personal property taxes, and
- State and local general sales taxes
Take note that these taxes are only itemized deductions in the year they were essentially paid to the government.
6.) Work-from-Home Office: Homeowners can deduct a portion of their mortgage, utilities, renovation, and technical equipment expenses in direct proportion to the amount of their home that is dedicated to the office. As stated above, hold on to all of your receipts.
There are probably more tax deductions that await your attention, but make sure to do your research and schedule an extensive meeting with a tax professional. Taxes are your biggest business expense. Get knowledgeable and save, save, save!