Homeowners And Taxes: Ten Great Suggestions

Tax breaks homeowners, homeowners tax refund, percentage of homeowners

Being the owner of a residential property can bring you significant benefits as far as taxes are concerned. It is important for you to have a clear idea of what the deductibles are, and of the ramifications of recently introduced regulations. Are you considering moving out of your rented home? It makes a lot of sense to purchase a house, especially now, and take advantages of the tax benefits involved. You should also consult a tax professional for the best advice in this regard.

Here are some of the deductibles involved when you purchase a house.

1. You can deduct taxes on property and interest on mortgage payments. The former can be deducted to a limit of $1 million, while the latter can be deducted fully.

2. Although closing costs are not deductible, amounts used for paying points or origination fees on a house purchased or renovated in the current year are.

3. Paying points on the refinancing of a mortgage or on a new loan for another property that has taken place in the current year are deductible. These points, with certain exceptions, should be spread over the loan period.

4. Private mortgage insurance or PMI is deductible. If you have less than $100,000 gross income, your PMI payments are completely deductible. Certain conditions apply here.

5. The costs involved in shifting your residence by at least 50 miles when you are transferred, or get a job somewhere else, are deductible.

6. Selling a house is subject to capital gains tax, but this need not be paid if you have earned less than $500,000 (in the case of married couples) or $250,000 (in the case of singles).

7. Although renovation and mortgage closing costs are not deductible, they will offset capital gains taxes, if any, when you sell the property in question. So don’t throw away those bills and receipts.

8. If, in a particular year, a lender forgives your debt because of a short sale, it is possible to exclude debt up to an amount of $2 million. Some conditions apply here.

9. Remember that friendliness to the environment pays dividends as far as tax benefits are concerned. If your home is built on energy efficient lines, or has been modified towards this end, you will be eligible for tax credits. You will need to show proof of your home’s energy efficiency, though.

10. Expenses to repair damage to your home that does not come under the coverage of your home owner’s insurance, are fully deductible, after reducing a deductible of $100 and 10% of your adjusted gross earnings. The damage referred to could be caused by a natural calamity, an accident such as fire, burglary or malicious harm by vandals.