Its tax time again and if you are a homeowner there are some things you should know before you file your taxes this year. If you are not a homeowner yet, what are you waiting for? Interest rates are not going to get any lower and there are some great loan programs like Rural Development Loans that don’t require a down payment. If you are getting a tax refund this year, put it towards buying a house so you can reap the benefits of home ownership next year at tax time.
For those of you that do currently own a home and have a mortgage, mortgage interest is still tax deductible. Congress has tried several times to repeal this deduction but thanks, in part, to the National Association of Realtors they have been unsuccessful. Mortgage interest is most people’s largest deduction if you are able to itemize your taxes. If you have a mortgage, more than likely you will have enough mortgage interest to itemize and be able to deduct what you paid in interest on your taxes. Real estate property taxes are also deductible in most cases. If you live in this area, your property tax bill is probably sizeable and will also give you a nice tax deduction. Make sure you check with your accountant or tax preparer for advice on your own tax situation as everyone’s circumstances are different.
If you are paying PMI (Private Mortgage Insurance) on your mortgage those premiums are no longer tax deductible. The premiums were deductible in some situations previously, but sadly that ended in 2015. If you have taken out a home equity loan for capital improvements on your property, that interest may be deductible. Repairs such as painting, wallpapering or replacing carpet will not qualify as a capital improvement. It must be something that increases the home’s value such as building a garage or addition, adding another bath or something that is medically necessary such as installing a wheelchair ramp or a stair lift.
Again, check with your accountant to see if your repairs qualify for a tax deduction.
There is still one more year to take advantage of energy efficient tax credits. These are set to expire on December 31, 2016. Installing energy efficient windows, insulation, heating and cooling systems are all things that may qualify for this tax credit. Also set to expire at the end of 2016 is the renewable energy tax credit. Installing renewable energy sources like solar or wind power can get you a tax credit for as much as 30% of the cost and installation.
If you use a portion of your home exclusively as a home office you may be able to deduct some costs related to that from your taxes. Depreciation, insurance and repair costs for that portion of the home may be deductible. This is a tricky area with the IRS so make sure you discuss this with your tax advisor before taking the deduction. Also, if you had to re-locate for a job some of your moving expenses may be tax deductible. There are requirements you must meet such as your new job must be at least 50 miles farther away from your current home than your last job. Moving expenses, transportation costs and storage fees may all be deductible if you meet the criteria. The IRS has several publications available to assist you in determining if you qualify for any of these deductions. For more information, visit their website at www.irs.gov.
This is just a sampling of deductions and credits homeowners may qualify for this year. Always check with your accountant or tax preparer for advice about your specific situation. Home ownership takes work but at tax time your home can work for you by getting you a bigger refund so take advantage of every deduction you qualify for, that’s one of the benefits of owning your own home. If you haven’t taken the plunge into home ownership yet, 2016 should be the year you do!
For more information about tax deductions or home ownership visit my website at www.choicerealtyfreeport.com.