Give us a break … A tax break, that is! You’ve probably heard that there are tax advantages to owning a home, but many people don’t fully grasp the benefits.
At tax time, taking deductions (if they apply to your situation, of course) can potentially reduce the amount you owe. You can take the standard deduction, or you can itemize. If your itemized deductions add up to more than the standard deduction, it’s a no-brainer: It’s time to itemize!
As a homeowner, you qualify for your share of deductions. While you shouldn’t base your home-buying decisions solely on potential tax benefits, the deductions are a pleasant perk to ownership.
Here’s a list of the most popular itemized deductions that homeowners can take when they’re completing their tax returns:
- Mortgage interest
If you’ve been taking the standard deduction for years but recently purchased a home, revisit your tax-time strategy to see if the mortgage interest deduction makes itemizing the way to go.
- Second or vacation home
You can take applicable deductions on second homes or vacation homes, even if you rent these homes out. Here’s the catch: If you rent the residence, you must occupy it for at least part of the year. Always consult with a tax professional for the most up-to-date regulations regarding this.
- Property taxes
In most cases, homeowners can deduct up to $10,000 in taxes for all properties they own.
If you used your HELOC to fund home improvements, you’re in luck! You might be able to deduct the interest.
- Mortgage points
Did you pay for mortgage points to lower the interest on your loan this year? You should be able to deduct this amount since it is considered prepaid interest.
- Mortgage insurance
If the adjusted gross income for your household is $109,000 or less, you might be able to deduct part (or all!) of your PMI payments on your primary home. A bit of math goes into this, so check with your tax pro.
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