If you are looking to save money this tax season-look no further than one the most valuable things you own: your home.
Did you know you might be eligible to deduct your homeowners’ association fees, property insurance, home improvements, or even property appraisal fees?
Below are some common tax deductions for homeowners.
The Mortgage Interest Deduction
The mortgage interest deduction is one of the most substantial tax costs in our country’s tax code, and it makes up more than 38 percent of the deductions taken by middle-class Americans. Unfortunately, many taxpayers don’t even use it!
If you are a homeowner, you may deduct up to $1 million in mortgage interest. Make sure to itemize your deductions to take advantage of these tax benefits.
When you pay to get a superior rate on your home loan, or if you refinance your loan, the percentage points may be eligible to use as a deduction in the year you paid for them. If you have taken out a home equity loan or line of credit, this same tax law applies. Additionally, if the loan is used for home improvement, the points are deductible in the year the loan was granted.
Loan Forgiveness Deduction – Short Sale & Foreclosure Defense
Many homeowners have faced foreclosure over the past few years. Homeowners who have sold their property in a short sale may be entitled to some tax relief. If you owe more on your property than you earned from your lender after the short sale, the government may view the debt forgiveness on the part of the lender as taxable income for you. The Debt Forgiveness Act can temporarily relieve taxpayers of this increased tax burden.
Capital Gains Exclusion
Married couples filing jointly can exclude up to $500,000 on their tax return for selling their property. If you are single, you still may exclude up to $250,000. There is one condition: you must have resided in the home for at least two of the last five years prior to selling your home. The great news is that you can cash in on this capital gains exclusion every time your sell your primary home (with some stipulations).
Energy Efficiency Deductions
Okay, the energy efficiency deduction is technically a tax credit-which can directly reduce what you owe on your taxes. If you are a homeowner who has made energy efficiency upgrades to your home, such as insulation or new windows, you can deduct the cost of building materials. This is a maximum, one-time credit of $500.
Whether it is your vacation home on the beach, a cabin in the mountains, or an investment/income property, your second home is qualified for up to a $1 million deduction for interest paid on the property. So, if you are fortunate enough to own more than one home, meet with a tax specialist to learn more about which tax deductions you may be qualified to receive.
This year, some taxpayers sold their homes, some refinanced their loans, and others added energy efficient insulation to their property. If you are one of these people, don’t miss out on homeowner tax deductions!
Taxes are complicated, which is why it takes the knowledge of an industry professional to keep you informed on current tax laws. To learn more about tax relief, contact US Tax Shield.