The moment you purchase a home, you have the ability to take specific tax deductions for homeowners. There are several ways you become eligible for tax benefits through homeownership. Here are some of the top tax deductions and a short explanation of each.
Probably the most common tax deduction for homeowners is mortgage interest. You’re allowed to deduct up to $1 million in interest payments on your mortgage. There are some limitations based on your filing status, but most homeowners can deduct the interest payments on their mortgage.
In some cases, you will even be able to deduct some of the interest paid on a home equity line of credit. There are limitations placed on this deduction from the IRS, but some of the interest is usually deductible for homeowners.
Private Mortgage Insurance
If your lender required you to purchase PMI, you may be able to deduct the premiums on your taxes. This will depend on your income, as those making more than $100,000 per year will likely only be able to deduct a portion of the PMI premiums.
Points are used to buy down the interest rate on your mortgage. Each point is equal to 1% of the principle amount of the loan. As a homeowner, you’re allowed to deduct the full amount of the points associated with your home purchase. Even if you refinanced your mortgage the points are still deductible.
The property taxes you pay are fully deductible on your income taxes. However, you will not be able to claim the deduction until the taxes are actually paid. If the money is held in escrow, you have to wait until it’s actually used to pay your property taxes.
If you moved because of a new job, or because your job required you to move, a portion of the moving costs may be deductible. Your new job has to be at least 50 miles further from your old home than your old job was. In addition, you have to work full time for at least 39 weeks during the year after the move before you can deduct the moving costs.
Other tax deductions for homeowners include:
- Mortgage Tax Credit
- Home Office Deduction
- Home Improvements
- Health-Related Improvements
- Costs Related to Selling a Home
Make sure you consult a tax professional this tax season to ensure you get the largest homeowner’s tax deduction possible.
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