Disclaimer – This is only an informational summary of current tax issues in the news. If you need tax advice, please contact a tax attorney or CPA.
1. Mortgage Interest Deduction
The mortgage interest deduction has always been the most-beloved tax benefit of home buyers in the U.S. New homeowners’ monthly mortgage payments are made up almost entirely by interest for the first few years. Their ability to deduct that interest can result in a healthy reduction in tax liability.
2. Home Improvement Loan Interest Deduction
The interest on home equity loans used for “capital improvements” to a home can also be a tax deduction. Maintenance items like changing the carpet and painting a home are usually not included as capital improvements.
3. Private Mortgage Insurance (PMI) Deduction
If your mortgage was originated after Jan 1, 2007, and you have PMI, it can be a tax deduction. The deduction is phased out, 10 percent per $1,000, for taxpayers who have an adjusted gross income between $100,000-$109,000 and those above that level do not qualify.
4. Mortgage Points/Origination Deduction
Homeowners who paid points on their home purchase or refinance can often deduct those points on their tax returns.
5. Energy Efficiency Upgrades/Repairs Deduction
Homeowners can deduct the cost of the building materials used for energy efficiency upgrades to their home. This is actually a tax credit, one which is applied as a direct reduction of how much tax you owe, not just a reduction in your taxable income.
6. Profit on Sale of Real Estate Deduction
If you’ve sold a home in the past year, you’re likely aware that individuals can claim up to $250,000 of profit from the sale tax-free, and married couples can claim up to $500,000 tax-free.
7. Real Estate Selling Cost Deduction
For those lucky folks whose profits on the sale of their home might exceed the $250k/$500k limits, there are still some ways to reduce the tax burden. The costs of selling the home can be significant, and those in themselves can be claimed as tax deductions.
8. Home Office Deduction
The home office tax deduction is often cited as a deduction that increases your likelihood of being audited. While the raw numbers might add some credibility to that perception, it’s really the way a home office is deducted that gets some taxpayers into audit purgatory.
9. Property Tax Deduction
New homeowners often don’t know that their property taxes are deductible.
10. Loan Forgiveness Deduction
The Mortgage Debt Forgiveness Relief Act of 2007 was created when short sales were becoming a new and growing part of the real estate market.
IRS-suggested disclaimer: To the extent that this message or any attachment concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. This message was written to support the promotion or marketing of the transactions or matters addressed herein, and the taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
