Home ownership can provide significant tax breaks, when you have eligible deductions and itemize your income tax return. We’ve put together a list of 6 income tax deductions that apply to home ownership, with tips from the Motley Fool and the IRS!
Please keep in mind that this a general guideline only; not all deductions may apply to you, and filing rules are subject to change! Obtain professional advice from your tax preparer, and visit IRS.gov to learn more!
1. Mortgage interest paid during the calendar year is deductible on your itemized return. There are lofty limits to the amount may be claimed. Please refer to IRS Publication 936, and obtain guidance from your professional tax preparer.
2. Home equity loan interest paid is deductible, provided the debt is secured by your home. Certain qualifications must be met. Learn more by visiting this IRS link.
3. Mortgage insurance premiums, such as PMI or MIP, are deductible under certain income limits. The deduction begins to phase out when you earn $50,000 a year as a single tax filer, or $100,000 as a couple filing jointly. No mortgage insurance deduction may be taken if you earn more than $54,000 as a single filer, or $109,000 on a joint return.
4. Points paid at closing. Mortgage points are pre-paid interest, paid in a lump sum in return for a lower interest rate. For income tax purposes, points are basically treated like any other mortgage interest payment.
If the points you paid are in line with the market, you can deduct their full dollar value in the same calendar year you paid for them. If you pay an excessive amount in points, you may be required to calculate the deduction over the life of the loan.
5. Property taxes paid are also tax deductible, for any real estate taxes paid during that same calendar year.
6. Home office deductions are available if you’re self-employed, or work from home, and have a designated workspace in your home for business purposes. IRS rule changes in 2013 have made it easier to claim this deduction. See the IRS rules about home office deductions, and consult with your tax preparer.
Ready to enjoy the perks of home ownership? Income tax breaks are just one of the many reasons why buying a home could be your best financial move! Find an Exclusive Buyer Agent in your area today!