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Tax Tips for Homeowners

Tax Tips for Homeowners

It’s everyone’s favorite time of year again-tax time! This is my annual column about tax deductions for homeowners so if you are a procrastinator and have not yet completed your taxes, here are some deductions you can use.

Let me start by saying that you should always check with your accountant or tax preparer to make sure you can use these deductions as everyone’s tax situation is different. I am just giving you the information on what deductions may be available to you. If you have a mortgage on your primary residence you may be able to deduct the interest portion of your mortgage payments. This can amount to a very large deduction for most people and is one of the benefits of being a homeowner. In most cases, you can also deduct your property taxes. Again, if you own a home in Freeport or Stephenson County your property taxes are a significant tax deduction. Both of these deductions are being debated in Washington as part of income tax reform but for this year, you can still deduct them from your taxes.

If you purchased a new home in 2016, you may also be able to deduct your origination fee and any discount points you may have paid. Check with your tax preparer to see if you can qualify for these deductions. Also, if you have a home improvement loan or home equity line of credit (also known as HELOC) the interest on those payments may also be tax deductible.

Making your home more energy efficient may also provide you with some tax deductions. Installing energy efficient windows, insulation, storm doors, heating and air conditioning systems can make you eligible for a tax credit of up to $500 or a maximum of $200 for windows. This credit expired on December 31, 2016 so if you did any of these things last year you can still get the credit but if they don’t extend or re -establish the energy credit in 2017 it will no longer apply. Installing renewable energy systems like solar and wind in your home may qualify you for

the renewable Energy Efficiency Property Credit. This can be as much as 30% of the system and installation cost.

If you have a mortgage and pay PMI (private mortgage insurance), 2016 is the last year you can deduct those premiums. Also, the exclusion for mortgage debt forgiveness expired in 2016. If you sold a home though a short sale or had part of your mortgage loan forgiven, having that amount exempt from income tax expired in 2016. If you are in the process of a short sale or considering one this year, you should check with an accountant about the tax implications for 2017.As a reminder, if you sold your home in 2016 and lived in it as your principal residence for at least 2 of the last 5 years, you will be excluded for paying capital gain. The exclusion is up to $250,000 for a single person or $500,000 for joint filers.

If you used a portion of your home as a home office, you may qualify for a tax deduction. There are rules for this deduction so you should check with your accountant to see if you qualify. Under certain circumstances, you may be able to deduct moving expenses if you had to relocate for a job. You must meet time and distance requirements in order to qualify for these deductions.

Finally, if you were among the many people who took advantage of the First Time Home Buyer Tax Credit in 2008, from 2010 forward you will be repaying $500 a year for 15 years on your tax bill. If you bought your home in 2009 or 2010 and plan to stay in your home long term, this credit may not need to be re payed. There are other exceptions that you can discuss with your tax professional if you have this credit.

For more information about tax credits available to homeowners, look for IRS publication 530 or go the IRS website at IRS.gov. If you would like to take advantage of these credits for homeowners, stop renting and make 2017 the year you become a homeowner! Don’t forget that daylight savings time started at 2:00 am this morning so move your clocks ahead 1 hour and replace the batteries in your smoke and carbon monoxide detectors.

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