Many deductions for homeowners exist
Feb 28th, 2008 by Afiya
Thursday, February 28, 2008
Bill Evans Property taxes, interest rates, mortgage payments, repairs and living expenses can make home owning an expensive endeavor. Thankfully, there are many tax deductions that can make the experience more affordable.
Knowing the facts about these deductions will enable you to get the most beneficial tax breaks and help you use your home to your advantage.
Property taxes. You can deduct all your property taxes. Whether you own just one or multiple properties, this deduction can be used on every one of them.
Keep in mind however, that if you deduct too much, you will have to use the Alternative Minimum Tax. This ensures everyone is paying at least some taxes. Also, your real estate taxes are only deductible in the same year they are paid to the government.
Interest rates. Interest rates provide great deductions, especially in the first few years of homeownership when the majority of your payments are interest.
Only the first $1-million of debt is eligible for this deduction; limitations will be applied for a debt more than $1-million.
Home refinancing. If you refinanced, you may be able to write off the points paid for the new loan. But you’ll have to deduct them proportionately over the loan’s life.
Home-buyer loan points. The points you pay when closing on a home can be deducted from your income tax statement for that year. Recent tax changes no longer require sellers to pay income taxes on sale profits, as long as it’s under $250,000 if you’re single and $500,000 if you’re filing jointly with your spouse.
Home office. You may be able to deduct the cost associated with maintaining a qualified home office. Expenses such as painting and general upkeep are tax deductible. Also, whatever percentage is used as the home office is still eligible for exclusion tax breaks.
Home improvements. Home improvements made for health reasons are deductible from your taxes, as long as they aid those who are chronically ill or disabled, without adding value to your home.
Tax credits can also be deducted for eco-friendly improvements. Installing energy efficient windows and doors, roofing, insulation, central air conditioning, water heaters, solar energy systems and fuel cells will also give you a tax break.
Doing research or talking with a tax professional will help you figure out which deductions especially apply to you and how much of a break you are eligible for. If you later remember an overlooked deduction that can be documented, the tax form 1040X can be used to amend your tax returns up to three years after the original due date.
It pays off to take the extra time to check into all possible homeownership deductions.
Bill Evans is president of Real Living HER. Visit RealLivingHER.com or e-mail Evans at Bill.Evans@RealLiving.com.
