It’s everyone’s favorite time of year again-tax time! For some people, this may be the last year that you can take advantage of deductions that come with being a homeowner. Since most of the tax law changes don’t take effect until 2018, there are still deductions available to you when filing taxes for 2017.
The deduction that has the highest value for most people is the mortgage interest deduction that you can take if you itemize and use a schedule A. You can still deduct the interest you pay on your mortgage up to $500,000 if you file separately or $1,000,000 if you file jointly. Most of us aren’t paying that much in interest but you can deduct what you are paying up to that limit.
In some circumstances, interest you pay on a home equity loan or line of credit may also be deductible as long as you don’t exceed the previously mentioned limits. Starting with the 2018 tax year, those limits will change and fewer people will be able to deduct their mortgage interest because of the increase in the standard deduction.
Also deductible this year is prepaid interest or points you may have paid when you took out your mortgage or when you refinanced and took out money for improvements to your home. These are typically 100% deductible if you itemize. If you paid points or prepaid interest you should have received a form 1098 from your lender.
Another deduction that may be ending this year for some is your property tax deduction. Starting with the 2018 tax year, you can only deduct state and local taxes, including property taxes, up to $10,000. Again, if your property taxes are under that limit you may still lose the deduction because of the increase in the standard deduction for next year. You can only deduct that amount if you itemize and the increase in the standard deduction may eliminate the need to itemize.
This year though, you can still deduct your property taxes if you are going to itemize.
If you own a second home you may qualify for some additional deductions. As long as you don’t rent it out for more than 14 days a year, you may be able to deduct your mortgage interest and real estate taxes on your schedule A. These deductions may also be available for the last time this year. Depending on whether or not you can itemize next year and how much your property taxes are on your second home, you may be over the $10,000 cap.
There are some additional deductions for energy saving appliances and home improvements that may also be available if you qualify. The rules for those vary depending on the type and cost of improvement and the resulting energy savings. You can visit the Internal Revenue Service website at IRS.gov for more information on what deductions may be available and to see if you qualify. As always, everyone’s tax situation is different so consult your tax advisor for specific information as it applies to you. Don’t forget to change your clocks for daylight savings time!