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Tax Time is Coming

The hustle and bustle of the holidays is behind us and 2015 is here. Before we know it, tax time will be upon us and if you are a homeowner there are some things you will need to think about before you file your income taxes for 2014. In January or February you will receive information in the mail that you will need when you do your taxes. If you have a mortgage you will receive a statement showing the amount of mortgage interest you paid to your lender in 2014. In most cases this amount is tax deductible and can be significant since interest makes up the majority of most peopleís mortgage payment. Property taxes are also deductible in most cases. In order to take advantage of these deductions you will most likely need to itemize your taxes which takes some extra effort but is usually well worth it.

Besides the mortgage interest and property tax deductions, there are other deductions which you may qualify for as well. If you have made modifications to your home for a medical condition, some or all of the expense may be deductible. For example, installing a ramp, modifying a bathroom or adding handrails may be deductible as medical expenses. The amounts must be reasonable and medically necessary in order to qualify. Any of these improvements that are done to increase the value of the home will probably not qualify as medical deductions.

Another area you may be able to get a tax credit for is installing a qualified energy generating system. There is a tax credit available until December 31, 2016 for 30% of the cost (including labor and installation) for qualifying geothermal heat pumps, solar water heaters, solar panels, small wind turbines or fuel cells. The credit must be taken for the year the system was put into service and a Manufacturer Certification Statement must accompany the item in order to qualify. For more details on the energy tax credit you can visit the Federal Tax Credits for Energy Efficiency website.

If you sold a home in 2014 that was your principle residence and you owned it for at least two years and lived in it for two of the last 5 years you may not have to pay capital gains on any profit you made. The profit cannot be more than $250,000 ($500,000 for a married couple filing jointly) but for most people that wonít be the case.

Other deductions you may qualify for include home office deductions, points paid for your mortgage and interest on home equity loans used for home improvements to name a few. In order to determine which, if any of these deductions you may qualify for you will want to consult a tax specialist or an accountant because everyoneís circumstances will differ. Knowing what deductions may be available to you before you do your taxes may save you thousands and knowing what to look for ahead of time allows you to gather the necessary documentation before you visit your tax preparer.

If you donít yet own a home maybe 2015 is the year you become a homeowner. As you can see, the tax benefits are significant as compared to renting. If you are getting a tax refund this year, consider turning that into a down payment for a home of your own. There are great programs available to allow you to purchase a home with little or no money down. Make an appointment with a local lender and find out if you can qualify to purchase a home and use your tax refund to pay your closing costs. Invest in your own home and start building equity for yourself instead of your landlord and next year you can reap the tax benefits of being a homeowner too! Happy 2015!

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