10 Tax Deductions On Your Home
There are many tax benefits that come with owning a home. This begins from the time you purchase it to the time you sell it. Here’s a summary of the tax deductions still available for your 2017 tax returns.
#1: Interest On Your Mortgage
The mortgage interest that you pay for your home is tax deductible. This is limited to the maximum of one million dollars for those filing jointly. If you file separately, you will be able to deduct up to $500,000.
Plus, if you had to take out private mortgage insurance (PMI), you will also be able to deduct those premiums.
#2: Points
If you took out a mortgage in 2017, you can deduct the fees known as points. Each point equals 1% of your loan amount.
#3: Interest On Your Equity Loans
If you have an interest that you pay on your home equity loan, you may be able to make a deduction. The amount deducted depends on the smaller of these two options: 1. The total of your home’s fair market value (fair market value is what you would get for your house on the open market, minus certain debts) or 2. $100,000 ($50,000 if you filed separately from your spouse).
#4: Interest On A Home Improvement Loan
If you take out a loan in order to make substantial home improvements, you can deduct the interest on it with no upper dollar limit. However, the work you’re doing must be a “capital improvement” rather than ordinary repairs.
Qualifying capital improvements are those that increase your home’s value, prolong its life, or adapt it to new uses. For example, qualifying improvements might include adding a new roof, fence, swimming pool, garage, porch, built-in appliances, insulation, heating/cooling systems, landscaping, and so on.
Work that doesn’t qualify for an interest deduction includes repairs such as repainting, plastering, wallpapering, replacing broken or cracked tiles, patching the roof, repairing broken windows, and fixing minor leaks. However, you can use a home equity loan up to the limits discussed above to make repairs and then deduct the interest.
#5: Property Taxes
Taxes you pay to your city or state are deductible on your taxes. If your taxes are paid from your escrow account at the bank, you can only deduct the amount already paid, not the amount in the escrow account.
#6: Tax Deductions For Your Home Office
If a part of your home is used solely and consistently for your work, you may be able to deduct a percentage of the costs in your home that correlate with your home office. This can include such things as rent, insurance and the cost of repairs.
#7: Selling Costs
If you earn enough money selling your home that you will owe capital gains, you can reduce your gains by remembering to add in your selling costs. These costs include such things as your real estate agent’s commission, title insurance, lawyer fees, marketing and administrative costs, and fees.
If you decide to sell your home, you’ll be able to reduce your taxable capital gain by the amount of your selling costs. Real estate broker’s commissions, title insurance, legal fees, advertising costs, administrative costs, escrow fees, and inspection fees are all considered selling costs and deducted from your gain.
#8: Capital Gains Exclusion
Taxpayers that are married and filing jointly can exclude up to $500,000 in profit on the sale of their home. To do so, the house must be your primary home for two of the past five years.
If you file on your own, either because you are unmarried or are married and filing separately, you can keep up to $250,000 each, tax-free.
#9: The Costs Of Moving
Getting a new job that requires you to move may count as a deduction. In order to qualify for this deduction, there are a few IRS requirements you must meet. Your new job must be 50 miles or more farther away from your old home than your former job.
Moving cost tax deductions could consist of travel, shipping costs, temporary housing, and fees for putting your furniture in storage.
#10: Tax Credit Mortgage
Mortgage credit certificate (MCC) is a program that provides a mortgage interest tax credit of up to 20% of the mortgage interest payments made on a house when buying a home. This program is for low income or first-time buyers. This credit is accessible every year that you have the loan, and continue living in the home bought using the certificate.
Keeping these homeowner tax deductions in mind for your 2017 taxes could help you save some money. Be sure to speak to your own accountant to find which tax deductions work for your situation. Feel free to call us for tax accountant recommendations. We can also help you understand how the new tax laws will affect you in 2018.