Real Estate & Finance News
Tax Tips for Homeowners
Homeownership comes with a lot of advantages, especially when it comes to tax time. Make sure you are not missing out on these great money- saving tax write-offs. All deductions below should be itemized and outlined on Schedule a of your tax return. This information is for educational purposes only. Please consult your tax advisor to confirm which of these write-offs you are eligible for.
Your biggest tax break comes from writing off the money you paid towards interest on your mortgage. If your loan totals more than $1 million, the IRS limits how much of your paid interest can be deducted. Interest paid on mortgages for a second home is also deductible, as long as the combined total of both loans is less than $1 million. The second mortgage is not limited to just houses; it can also include an RV or boat, so long as it has cooking, sleeping, and restroom facilities. Additionally, you can even rent out your second property for part of the year and still deduct the mortgage interest on the loan. Just make sure you spend at least 14 days per year or more than 10% of the number of days that you rent it out (whichever is longer) at the second home. If you don’t, the IRS will consider the property to be a residential rental property and the interest will not be deductible.
another major money-saving write-off is on property taxes, which makes up a big part of your monthly mortgage payment. This portion of your payment is set aside into an escrow account for payment once a year. This amount should be included on the annual statement you get from your lender, along with your loan interest information. These taxes can be an annual deduction as long as you own your home.
If you paid points to get a better rate on your home loan, these can also be deducted. The IRS lets you deduct points the same year you paid them if the loan is used to purchase or build your main home. a homeowner who paid points to refinance their home is also eligible for this tax break, but the amount paid must be deducted over the life of the loan. any points paid on a loan secured by a second home must be deducted over the life of the loan as well.
Income gained from selling your home
If you sell your home you will be able to avoid paying taxes on the profit you make from the sale. A homeowner can gain up to $250,000 (or $500,000 for married joint filers) tax-free as long as the homeowner owned the property for two years and lived in it as a primary residence at least 2 of the previous 5 years.
What’s not deductible?
There are many expenses related to a home that are deductible, but some remain the sole responsibility of the homeowner. For example, Hazard Insurance Premiums are not tax deductible. Depreciation of your home, homeowners’ association dues, and closing costs are also nondeductible expenses.
Again, please ask your tax professional if you qualify for any of these deductions before claiming them. If you purchased or refinanced a home through Broadview Mortgage in 2010, you can contact your loan officer directly to obtain a copy of your closing statement if necessary. At Broadview Mortgage we work by referral only and a referral is the highest compliment you can offer! Thanks for your business.