Owning a home invokes more than a sense of pride and freedom. It is also a long-term investment opportunity. With tax season here, the time is here to consult with your tax advisor regarding the tax advantages associated with homeownership.
Some of the tax benefits that homeowners enjoy are:
Mortgage Interest Deduction:
Interest you pay on a mortgage of up to $1 million – or $500,000 if you’re married filing separately – is deductible when you use the loan to buy, build or improve your home.
Mortgage Points:
Did you pay points to get a better rate on any of your various home loans? They offer a tax break, too. The only issue is exactly when you get to claim them. The IRS lets you deduct points in the year you paid them if, among other things, the loan is to purchase or build your main home, payment of points is an established business practice in your area and the points were within the usual range. Make sure your loan meets all the qualification requirements so that you can deduct points all at once.
Property Taxes:
You can deduct the real estate property taxes you pay each year, as well as any property taxes paid at the time you closed the purchase of your house.
Mortgage Insurance Premium Deduction:
If you had to take out private mortgage insurance, the premium on that insurance can be deducted, as long as your income is less than $100,000 (or $50,000 for married filing separately).
Energy Efficiency Upgrades/Repairs Deduction:
Homeowners can deduct the cost of the building materials used for energy efficiency upgrades to their home. This is actually a tax credit, one which is applied as a direct reduction of how much tax you owe, not just a reduction in your taxable income.
10 percent of the total bill for energy-efficient materials can be used as a tax credit, up to a maximum $500 credit. Insulation, doors, new roofs, and many other items qualify for the energy efficiency credit. There are also individual limits for certain items, such as $150 for furnaces, $200 for windows, and $300 for air conditioners and heat pumps.
