Your home is likely your most valuable asset, and you probably know that it can keep working for you for the entire time you own it. Some of the benefits can be tough to find, however, or you might not even know to look for them. Here’s a brief list of some common deductions your home may be eligible for or that you might ask your accountant about.
Probably the most common deduction for homeowners, the interest paid on your mortgage is likely to be tax deductible. Your interest payments are deductible on up to $1 million, but anything over that is not. There are other stipulations as well, so it’s best to check it out for yourself or ask your accountant to make sure you qualify.
Many lenders charge a fee on a mortgage called “points,” and fortunately this fee is deductible. This is one of the less known about tax deductions for homeowners, but it’s also one of the simplest. The points can add up to thousands of dollars worth of deductible, so it could pay handsomely to look into whether or not you’re getting everything to which you’re entitled.
Home Improvement or Home Equity Interest
These are both pretty common tax deductions for homeowners. If you’ve taken a home improvement or home equity loan out recently some of the interest may be deductible. There’s a limit, though, so be careful. The equity interest is usually deductible, but the home improvements must actively increase your home's value rather than be a simple repair. There may be no better time to put that new kitchen in!
That pesky property tax is deductible too. Anything you’ve paid towards property tax is deductible as long as it’s been paid, that means if your lender requires you to put money in escrow you can’t deduct that until you actually use it.
Most people know about this one, but few actually take advantage of it. Any space in your home used for business purposes can be claimed as a home office. In addition, percentages of cost related to that part of your home can be deducted as well, things like insurance, depreciation and other typical home costs. Look into it to find out the specifics that you can use!
This is one of the more complicated tax deductions for homeowners. If you’ve recently sold your home, you may be able to deduct the selling cost from your capital gain. Any costs associated with selling your home are considered selling costs, things like legal fees and real estate broker’s commissions. These costs can make a big dent in your capital gain and may bring you within the exclusion limit. The whole deduction is a bit tricky, so it’s best to review it with your accountant.
As far as tax deductions for homeowners go, it doesn’t get much better than this. If you’ve made a profit from the sale of a primary residence, up to $500,000, and you’re filing jointly with your spouse, you can claim that for up to five years. If you file separately, you can keep $250,000 each. A pretty nice reward for a house well sold!
If you’ve moved due to a new job in the last year you might be able to take some of the moving cost off of your taxes. These costs could include travel costs, lodging, and storage, among others. There are quite a few qualifications to meet for this one, so it’s best to talk to your accountant or check with the IRS to make sure you meet the requirements.
Mortgage Tax Credit For New Buyers
Even if you’re a new homebuyer, you might qualify for some deductions. You could get a credit of up to 20% on a new home if you qualify as a low-income homebuyer. Check with your accountant or take a look at the IRS stipulations to make sure you qualify, but if you do you could receive a credit of $2,000!
Tax deductions for homeowners can be confusing but think of this as a treasure map to help you sort out what to claim. With a little effort, your tax accountant is sure to be impressed!
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