As tax season is fast approaching, it is a good idea to take a look at where you can find tax deductions to help make writing that check a little easier. Renters are pretty much out of luck, but if you are a homeowner, there are plenty of tax breaks you should be taking advantage of. In 2012, on average, homeowners saved $1,900 on taxes.Below are a list of the top tax deductions for homeowners.
Almost all of the mortgage interest on your primary and even secondary home can be written off. Limits include your marital status, the maximum loan and income. You can deduct all of your interest on a maximum mortgage debt of $1 million. This $1 million can't be paid in cash or used later for an equity loan. As for income, if you earn more than $109,000, you do not qualify for a tax deduction.
Points are considered as prepaid interest or a fee that is charged by your mortgage lender. A point is equal to 1% of the principal loan amount and can be fully deducted in association with your first home. For second homes and refinancing, deductions in association with points have to be spread out with the duration of the home.
Interest on Home Improvements:
If you are looking to make improvements to your home and need to take out a loan, the interest on up to $100,000 spent on those improvements can be considered towards a tax break. Limits to this tax deduction is that the improvements must be considered capital improvement. They can't just be maintenance or small repairs. Improvements that would qualify include a new heating/cooling system, new roof, adding a garage or improving landscaping with a fence or swimming pool. Things such as repainting, repairing the roof or fixing leaks would not qualify.
Equity Home Interest:
The interest on your home equity loan can be deducted if it is less than $100,000 jointly or less than the fair market value of the home.
City or state property taxes are almost always fully deductible.
Home Office Deduction:
If you work at home, certain costs associated with that business can be deducted.
Residential Energy Efficient Tax Credit:
Any updates made to your home to increase its energy efficiency can be reimbursed for up to $500.
Renewable Energy Tax Credit:
If you updated your home with equipment to help power your home with the sun and wind, you may be eligible for a tax credit on up to 30% of those costs.
Costs associated with selling your home may be eligible to get a tax break. Some of these costs include real estate broker's commission, legal fees, advertising, title insurance, administrative costs, escrow fees and inspection.
Buying a Home:
First time home buyers are eligible to take out up to $10,000 from their IRA without any penalty. A family member can also take out up to $10,000 from their IRA without a penalty and that $20,000 can be used towards the purchase of a home within 120 days of the withdrawal.
Income and Interest on Reverse Mortgages:
A reverse mortgage is not income, but a loan advance. The amount you receive is not deductible, but the interest on the loan once it is fully paid off qualifies for a deduction.
Capital Gains Exclusion:
When you sale your home as a married couple, you are eligible to keep up to $500,000 of the profit tax free. If you are single or file separately, you can keep up to $250,000 tax free.
You are eligible for a deduction if you move because of a new job. There are certain requirements, however, such as how far the new job is from your previous home and what the deductions can be used for.
For more information, visit:
NOLO Tax Deductions for Homeowners
10 Homeowner Tax Breaks You Should Be Taking Advantage Of
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