If you are a homeowner and have not already completed you taxes, you may want to give today’s blog a quick read. It may just save you some money.
As there are quite a few tax deductions for homeowners this year, here are my top five.
1. Mortgage Interest: A home mortgage interest deduction allows taxpayers who own their homes to reduce their taxable income by the amount of interest paid on the home loan. For you newer homeowners, this even includes all those prepaid points you might have paid at your closing if you purchased last year. For all you investors, the purpose of the mortgage must specifically be to buy, build or improve a home in order to reap the rewards of this deduction.
2. Home Improvement: Generally, there are three ways a home improvement might benefit you financially come tax time. You may be eligible for some sort of income tax relief if your home improvements are being performed for medical reasons, your home improvements include certain energy-efficient upgrades to your home, or you are going to be using a home equity loan or home equity line of credit to actually pay for your home improvements. I will be deducting the cost of adding a new layer of attic insulation.
3. Loan Points Paid on a Refinance: If you refinanced in the last year, you may be able to deduct any points you paid to buy down the mortgage rate. These points must be deducted proportionately over the life of the loan. For example, if you took out a 30-year mortgage, you would deduct 1/30th of the points each tax year. Many homeowners have overlooked an important tax opportunity. If you have refinanced more than once, you can deduct unclaimed points from an earlier refinance.
4. Private Mortgage Insurance (PMI): Private Mortgage Insurance is designed to protect lenders in the event that you default. You pay mortgage insurance premiums in order to help the lender recoup losses if you stop making payments. If you have been paying premiums, they are deductible when you itemize instead of taking the standard deduction. In order for your home to qualify, though, it has to have been bought after January 1, 2007. The PMI deduction only applies to mortgages made in the year 2007 and after. The mortgage also must be secured by your home.
5. Home Offices: When you use part of your home for business, you may be able to deduct expenses for what the IRS calls the “business use of your home.” The home office deduction is available for office space and other areas you use for business in your home — such as a studio, workshop, or garage. In order to qualify, you must meet two requirements. The first is “regular and exclusive use” which means you must regularly use part of your home exclusively for a trade or business. The second is “principal place of business” which means you must also be able to show that you use your home as your principal place of business.
Real Estate Professional
St. Louis Real Estate