Here are 5 deductions for homeowners:
Mortgage interest will likely get you the biggest deduction. All the interest you pay on your mortgage, unless your loan is more than $1 million, is tax deductible. This deduction also covers interest on refinancing and home equity loans. It even applies to interest on loans for second homes, RVs or anything that has cooking, sleeping and bathroom facilities.
Property taxes are likely your second biggest deduction. The amount of your property taxes should be included with the annual statement you receive from your lender. If you’re a new homeowner, you will be able to find the property taxes you paid on the settlement sheet from closing. If you don’t have your settlement sheet handy, reach out to your agent to request a copy.
If you paid points to get a better rate on your home loan or refinancing, those are tax deductible for the year you paid them. One point is equal to 1% of the principal loan amount. Think of them as prepaid interest. Be careful though, you have to meet all the criteria to deduct them up from, otherwise they will be deducted over the course of your loan. Here’s a helpful reference guide from the IRS, see page 4 or just mention it to your accountant.
If you’ve installed storm doors, energy efficient windows, new insulation or new HVAC systems, you may be eligible for a tax credit of $500. Energy efficiency credits are set to expire on Dec. 31, 2016 so if you didn’t take advantage of it last year, this year may be your last chance!
Selling Your Home
If you sell your home and don’t use the profit to purchase a new home, you will be taxed. However, you can avoid paying taxes on a portion of it. Up to $250,000 of profit per person is tax free if you have owned and lived in the property for two years. If the sale of your home was due to a change in health, employment or other unforeseen circumstances, the IRS will make tax breaks.
Good luck out there. It’s highly recommended to consult a professional for help with your taxes, or at the very least use a program such as TurboTax. Your agent may have some local recommendations to tax professionals. Reach out today and ask!