Believe it or not, the IRS is nice to homeowners. Tax season will be here before we know it, so here are nine tax breaks that are available to homeowners.
1.) Purchase Costs Deductions: Did you know that any “daily interest” paid on the mortgage at the time of your closing is deductible? Well, now you know. In many cases, any loan discount points and origination fees are tax deductible for the buyer, no matter who pays for them. Hold onto your HUD settlement statement, this statement contains all the information need when it is time to prepare your return.
2.) Mortgage Interest Deduction: Every year that interest is paid on your mortgage is tax deductible up to $1 million in mortgage debt on your first or second home, if you are married filing jointly. If you purchased a home in 2007 through 2010 your lender may have required you to buy PMI (Private Mortgage Insurance), that PMI may be tax deductible, with certain income limits.
3.) Property Tax Deduction: All real estate taxes are fully deductible.
4.) Home Office Expense Deduction: If your business requires that you use a portion of your home exclusively for those purposes, you may be able to deduct the percentage of your home costs related to that portion. To consult with a tax professional, visit www.irs.gov
5.) Home Equity Loan Interest Deduction: Any interest that you may pay on a home equity or line of credit may be deductible, up to a certain amount specified by the IRS.
6.) Home Improvement Loan Interest Deduction: If you have took out a long to complete that one big project you always said you would, then you are in luck. You are able to deduct the interest with no dollar limit. Although you need to make sure that the work being complete is a “capital improvement”, not fixing you kitchen sink. If you visit www.irs.gov to see a list of the improvements that qualify.
7.) Capital Gains Exclusion: If you are a taxpayer who is married and files jointly, you can keep up to $500,000 in profit on the sale of a home used a principal residence two out of the prior five years. If you are single and married filing separately, you can keep up to $250,000 each tax free.
8.) Mortgage Insurance Deduction: The premiums you pay for mortgage insurance may be deductible up to a certain income limit specified by the IRS.
9.) Selling Costs Deduction: If you end up with a capital gain above the exclusion (WOOHOO!) you can reduce it by the amount of your selling costs, including broker’s commissions, title insurance, and legal fees, among others. You can also deduct decorating and repairs you do to make your home more salable.
*Before filing any tax deductions, always make sure to have them reviewed by a tax professional.
As always, I’d be happy to answer any questions and help to ensure that you will be receiving every penny back from the IRS. Just call or email me today.
Donna Holmer is a Branch Manager & Senior Loan Officer for Diamond Residential Mortgage Corporation in Merrillville, IN. Feel free to contact Donna at 219 682 4208 or email her at Donna.Holmer@TheDRMC.com.