Being a homeowner definitely has its advantages, and saving money on your taxes each year just might be at the top of the list. Make sure you're taking advantage of these common tax perks as a homeowner:
1) Mortgage interest One of the most commonly used tax perks, you can deduct mortgage interest for your primary residence and for a second home, as long as you mean certain conditions.
2) Equity loan interest If you have a line of credit or home equity loan, you may be able to deduct some of the interest within IRS limits.
3) Property taxes or real estate taxes State or city property taxes may be fully deductible from your income. Your mortgage lender may have required you to set up an escrow account and you can deduct when the funds are used to pay the property taxes. Keep in mind that if you receive a refund on city or state property taxes, this will reduce your federal deduction.
4) Points On your fee schedule from your lender, you'll probably notice some different charges. One charge may be for "points" and one point equals 1% of your loan principal. While not every borrower pays points, you may be able to deduct any points associated with a home purchase mortgage. If you have refinanced loan points, you can also deduct these, but only over the life of the loan, and not all at one time. If you refinance, you can deduct the balance of the old points and begin to amortize the new right away.
5) Costs associated with moving for work If you moved to a new home for a new job, you might be able to deduct some of your moving expenses. There are some stipulations to qualification, like your new job has to be at least 50 miles farther from your old home than your previous job. Some of the moving expenses you might be able to deduct include costs for storage, transportation, and lodging.
6) Home improvement loan interest If you've completed some home improvements that are considered a "capital improvement" and took out a loan to cover the upgrades, you may be able to deduct the interest on it, with no upper dollar limit. The home improvements can't be for ordinary repairs like drywall repair, painting, fixing gutters or patching a roof — they need to be renovations that contribute to increasing the property value of your home. Items such as a new roof, pool, garage, addition, landscaping, or insulation would all likely qualify. For some great tips on adding a walkway as an improvement, check out this article!
7) Home office deduction If you work from home and have a dedicated home office that you use exclusively for your work, you may be able to deduct a portion of your home costs, such as a percentage of depreciation and insurance.
8) Selling costs If you sell your home, you might be able to reduce your taxable capital gain by the amount of your associated selling costs. Some of the selling costs you may be able to deduct from your profit include inspection costs, title insurance, realtor's commissions, and title insurance.
9) Capital gains exclusion If you're married, file taxes jointly, and sell your home, you can keep up to $500,000 in profit on the sale of a home as long as it was your principal residence for at least two of the past five years. Married couples filing separately, as well as singles, can keep up to $250,000 each, tax-free.
10) Buying a home for the first time If you're a first-time homeowner, you might be able to withdraw up to $10,000 from a traditional IRA, without a penalty, to help cover the costs of purchasing a home.
If you need a tax professional to help with these deductions, please let us know and we can recommend someone great.
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