Homeowner Tax Breaks for your 2015 Return
Tax time is looming on the horizon and as a new home owner you may be wondering what options you have when you file your return. The good news is that there are many opportunities available. Here’s what you need to know:
The mortgage interest that you pay on your home loan every month is deductible at tax time. In fact, up to $1 million of the interest on your payment is tax deductible. You can deduct your mortgage interest on your primary residence, as well as on a secondary residence. There are limitations, but only a relatively few are affected.
Interest on a Home-Improvement Loan
Interest on a Home-Improvement Loan: Interest paid on a home improvement loan is fully deductible, up to $100,000. Interest paid on a home equity line of credit (HELOC) is also tax-deductible. The IRS does place a limit on the amount of debt you can treat as “home equity” for this deduction. You can find more information about limitations in IRS Publication 936, Home Mortgage Interest Deduction.
Prepaid Interest Deduction
Another deductible option is the prepaid interest or points you paid when you took out your mortgage. Prepaid interest or points are 100% deductible in the first year you paid it along with any other mortgage interest. If you paid for points on a refinanced loan, you can still be eligible for a tax break, but depending on circumstances, they may have to be deducted over the life of your mortgage.
Property Tax Deduction
Once your monthly loan payments go into an escrow account, the amount of real estate property tax you paid will be included on your yearly statement. These taxes are deductible. If this is your first year of ownership, you can even deduct the taxes which applied to the amount of time you owned the house.
Mortgage Insurance Premiums
You may be eligible to claim private mortgage insurance, also known as PMI, or mortgage insurance premiums if your mortgage was insured. As long as your yearly income doesn’t exceed $100,000, the premium on your private mortgage insurance may be deducted. Government insurance like FHA, VA, and the Rural Housing Service is also deductible.
These not only help you save on utilities, but they can make you eligible for Non-business Energy Tax Credits too. Non-business Energy Tax Credits allow you to offset what you owe the IRS dollar for dollar. The amount is up to 10% of what you spent on certain upgrades. There is a lifetime cap of $500 for these credits. Do your homework by checking out thislist of upgrades that qualify.
As tax time approaches, be sure to consult with your accountant, especially if you’re new to home-ownership. Your accountant will help you navigate the tax code so that you can take reap all the benefits of being a homeowner.