Hey Homeowners These LittleKnown Tax Deductions Can Save You Thousands
Hey Homeowners These LittleKnown Tax Deductions Can Save You Thousands
You probably already know that owning a home comes with some sweet tax benefits, like the mortgage-interest and property-tax deductions. But did you know there’s a whole list of other homeowner-related tax breaks that you might be leaving on the table?
We’re not talking chump change, either. Homeowners already save an average of $3,000 a year in taxes from mortgage-interest and property-tax deductions, according to the National Association of Realtors. When you add in some of the lesser-known homeowner tax breaks, you could really be amping up the savings—and beating the IRS at its own game.
Back in December, Congress passed theProtecting Americans From Tax Hikes Act of 2015, which extended many exemptions that were about to expire and made others permanent. But to reap the benefits, you first have to know about them.
So, here we go! Check out these common—and not-so-common—homeowner deductions that you should take advantage of this year:
1. Mortgage interest deduction
If you’ve taken out a loan to buy a house, you can deduct the interest you pay on a mortgage, with a balance of up to $1 million. To access this deduction, you will have to itemize rather than take the standard deduction. The savings here can add up in a big way. For example, if you’re in the 25% tax bracket and deduct $10,000 of mortgage interest, you can save $2,500.
Of course, there are some limitations. For example, if you’re helping a family member pay his or her mortgage, you can’t deduct that interest on your tax return.
2. Private mortgage insurance
Qualified homeowners can deduct payments for private mortgage insurance, or PMI, for a primary home. Sometimes you can take the deduction for a second property as well, as long as it isn’t a rental unit. Here’s the catch: This only applies if you got your loan in 2007 or later.
Another restriction: This deduction only applies if your adjusted gross income is no more than $109,000 if married filing jointly or $54,500 if married filing separately.
3. Property taxes
You can include state and localproperty taxesas itemized deductions. An interesting note: The amount of the deduction depends on when you pay the tax, not when the tax is due. As a result, paying property taxes earlier could have a positive impact on your return.
4. Capital gains on a home sale
The dreadedcapital gains tax can be avoided when the gain from selling your personal residence is less than $250,000 if you are a single taxpayer or $500,000 if you are a joint filer. To qualify, you must have owned and used the home as a primary residence for at least two years out of the five years leading up to the sale.
5. Medical improvements
If you’ve made improvements to your home to help meet medical needs, such as installing a ramp or a lift, you could deduct the expenses—but only the amount by which the cost of the improvements exceed the increase in your home’s value. (In other words, you can’t deduct the entire cost of the equipment or improvements.)
“A lot of this comes down to fact and circumstance,” saysGil Charney, director ofThe Tax Institute at H&R Block. “For example, if you’ve recently installed a heated therapy spa or hot tub in your home, you may be able to deduct the expense if there’s also evidence that, say, a physical therapist visits your home three times a week and you’re over a certain age.”
6. Home office
If you have a dedicated space in your home for work and it’s not used for anything else, you could deduct it as ahome office expense.
“It doesn’t have to be an entire room,” Charney says. “It can just be a dedicated space.”
7. Renting out your home on occasion
If yourented out your homefor, say, a major sports event like the Super Bowl or the World Series, or a cultural event such as Mardi Gras, the income on the rental could be totally tax free—as long as it was for only 14 days or fewer throughout the course of a year.
8. Discount points
Discount points, which are paid to lower the interest rate on a loan, can be deducted in full for the year in which they were paid. In addition, if you’re buying a home and the seller pays the points as an incentive to get you to buy the house, you can deduct those points, Charney explains.
9. Energy-efficiency tax credit
You can take advantage of anenergy-efficiency tax creditof 10% of the amount paid (up to $500) for any green improvements, such as storm doors, energy-efficient windows, and air-conditioning and heating systems.
10. Loan forgiveness deduction
If you’re the owner of a foreclosed or short-sale home, you can take advantage of mortgage-debt forgiveness. For example, if you make a short sale of your primary home at $250,000 but owe $300,000 on your mortgage, the lender will forgive the extra $50,000 owed—and you don’t have to pay taxes on that amount.
Author:Karol Alvarenga Phone: 321-201-5318 Dated: March 22nd 2016 Views: 289 About Karol: Check out my Website: http://karol.exitrealtych.com
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