Tax time is upon us and the deadline to file your taxes is quickly approaching. For homeowners, their home gives them a great deal of tax benefits to apply to Internal Revenue Service filings. Here are just some of the cool tax breaks that are available to homeowners.
1. Mortgage Interest- The interest that you pay on your home mortgage is tax deductible. There are some limitations to this tax break, however. For instance, if you are married and you file your taxes jointly with your spouse, you are able to deduct the total of your interest payments up to a maximum of $1 million for a first or second home mortgage.
2. Green Home Improvements- During the last year, many homeowners found ways to make their homes more energy efficient, especially Maine homeowners and those in other northeastern states who heated their home through green methods. This remodeling venture allowed them to save money on things like their electric bill. Some of these energy efficient projects include installing solar panels, dual-paned windows, tankless water heaters, low-flow plumbing appliances or insulation.
3. Private Mortgage Insurance- If you own your home and you made a down payment of 20% or less, than you are most likely paying what is called Private Mortgage Insurance. This insurance can cost anywhere from a couple of dollars each month to several hundred dollars. If you obtained your home mortgage after January 1 of 2007 with a PMI, you are eligible for a tax deduction.
4. Mortgage Points- If you are a homeowner that paid points as part of your home purchase or home refinance, these points are often tax deductible. The points are often referred to as origination fees and are calculated as a percentage of the lender’s fee to originate the loan. For home purchases, you are able to deduct all of the points paid for last year. For refinancing, you will payback a certain amount through the life of the loan.
5. Property Tax Deduction- Most homeowners are not aware that the property taxes that they pay each year are tax deductible. You do not have to pay any income on money used to pay property taxes.
6. Loan Forgiveness Deduction- In 2007, the Mortgage Debt Forgiveness Relief Act was instated due to the fact that short sales were becoming an increasing part of the real estate market.
7. Home Improvement Loan Interest- If you have taken out any type of loan so that you could make major renovations on your home, you are able to deduct the interest of the loan. There is a stipulation to this, however, since it must be listed as capital improvement and not just regular home repairs.
8. Home Office Deduction- If you are a homeowner that uses part of your home for business purposes, you can deduct certain costs of your home. You can deduct things such as office supplies, telephone charges and part of your mortgage, utilities, taxes and insurance.
9. Moving Costs- If you moved any time last year because of new employment, some of your moving costs may be deducted on your taxes. There are some requirements that you have to meet including the fact that your new job is required to be 50 miles more from the distance of your previous home than your previous job.