Tax time is just around the corner! Are you considering all of the possible advantages available to you as a homeowner? Whether you bought or sold a home this year or you have an existing mortgage, there are several tax deductions or credits that you may qualify for. Taking advantage of these deductions can help you keep more of the money that you earn in your pocket. Take a look at the tax terms below and get familiar so you know which deductions and credits you can claim!
Mortgage deduction – Similar to the student loan interest deductions that many of us have taken advantage of, homeowners are allowed to deduct the mortgage interest they have paid over the year from their tax obligations. For some people this can be a sizable deduction. Interest payments make up the largest portion of your mortgage payment in the early years of owning a home.
Property tax deduction – You are able to deduct on the real estate property taxes you pay. If your mortgage has an escrow account, your real estate property taxes that you have paid will show up on your annual escrow statement. If you bought a house this year, you can find out if you paid any property taxes when you closed on the purchase of your house by looking on your HUD-1 settlement statement.
Closing cost deductions – If you are in the first year of homeownership, you are able to claim the points or origination fees on your loan. This is true whether you or the seller was the one who paid them originally. The savings that you get with this deduction can be considerable, make sure to ask your tax professional if you qualify.
Capital Gains Exclusion – If you buy a home, live in it as your primary residence for two years out of the five years prior to selling it, and hopefully then sell it at a return, you may qualify for this exclusion. You may qualify to exclude up to $250,000, if you’re single, or $500,000.
Energy-Efficiency Upgrades – The Nonbusiness Energy Tax Credit lets you claim a credit for installing energy-efficient appliances and upgrades to your home systems. This tax credit lets you claim up to 10% of the amount you spent on qualifying energy efficient upgrades. While this credit has a $500 lifetime limit, the real benefit comes with the money you will save on your utility bills over the years.
*Please consult your tax advisor to see if you qualify. Check out more information on the IRS website.
If you aren’t a homeowner yet, but these benefits look like something you would like to be able to take advantage of next tax season, give us a call at (877) 706-5856 and we will be happy to help you get prepped to be a homeowner! We do this every day, and we love it, so if you give us the chance to share even more information, we’d gladly oblige.