8 tax breaks for home owners

Mortgage interest (including that paid at closing)

Points

Did you buy a home?  Or Refinance? Did you pay points in order to obtain your home mortgage? These fees  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.

Property taxes

Generally you can deduct your state and local property taxes.  Check with your tax accountant on specific rules.

Selling costs

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.

Home office

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.

Mortgage insurance premiums

You may be able to deduct the premiums paid for private mortgage insurance for your principal residence and for a non-rental second home.  A qualified tax adviser can provide information about rules for mortgage insurance.

Home improvement loan interest

If you’ve taken out a loan to make improvements on your home, you may be able to deduct the interest on this loan. Qualifying loans are those taken out to add “capital improvements” to your home, meaning the improvement must increase your home’s value, adapt it to new uses or extend its life. New carpeting or painting are not considered capital improvements, while adding a garage, installing a water heater or building a deck are all examples of capital improvements.

Construction loan interest

If you take out a construction loan to build a home, you may qualify to deduct the interest. The IRS only allows a deduction for mortgage interest if the loan relates to a “qualified” home, which means it must either be your principal residence or a vacation home that you will use for personal purposes. You can only use this deduction for the first 24 months of the loan, even if the actual construction takes longer.

ALWAYS consult with a qualified tax professional concerning deductions and credits and to ensure you’re not missing any deductions for which you’re eligible.

 

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