February 24th, 2016 6:44 AM by Jackie A. Graves, President
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?
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.
December, Congress passed the Protecting
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.
here we go! Check out these common—and not-so-common—homeowner deductions that
you should take advantage of this year:
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.
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
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.
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
include state and local property
taxes as 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.
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.
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
of this comes down to fact and circumstance,” says Gil Charney, director
of The 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
have a dedicated space in your home for work and it’s not used for anything
else, you could deduct it as a home
doesn’t have to be an entire room,” Charney says. “It can just be a dedicated
If you rented
out your home for,
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.
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.
take advantage of an energy-efficiency
tax credit of
10% of the amount paid (up to $500) for any green improvements, such as
storm doors, energy-efficient windows, and air-conditioning and heating
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.
more tax tips, check out IRS Publication 530 for a list of what
homeowners can (and cannot) deduct.
By Renee Morad – To view the original article click here