Tax Breaks for Home owners
Our government offers so many tax breaks for home owners every year, so that home buyers take advantage of those! Most people donot know about these benefits.
I will letting you guys know about these tx brteaks, so you can take advantage of them. Most important one is the Interest that you pay on your Mortgage. your first home'e mortgage interest and also second home's, is tax deductible, up to $1.1 million of debt when you include home-equity loans that are used for certain personal expenditures, such as funding college education. In most cases, homeowners are also able to write off their property taxes. These tax breaks will surely alleviate the financial burden of many taxpayers, especially those who are paying their mortgage
Home owners have more Tax deduction opportunities than the renters. The only benefit that renters have is the Low Income housing Tax Credit, and it goes to investors, when they build the affordable units.
Some more tax breaks, in addition to the mortgage interest are as follow, but please consult your accountant to get more accurate tax deductions.
1. Points on mortgage and refinancing:
If you bought the home last year, or the year after your home purchase, you can claim the points that you bought to bring down the mortgage interest, as well as origination point. So the discount points as well as origination points are tax deductible. Points are considered prepaid interest by IRS. There are 2 ways the points are deductde, somtimes you have to spread them out for the life of the loan and other times you can deduct them all at once. If you buoght your first home, or had it built, you can deduct the points all at once. On the second home , most of the time you have spread out the deduction over the life of the loan.
2. Interest on home improvement loan:
The interest on Home improvement loan is almost always 100% deductible, upto $100,000 in debt. Interest paid on home equity line of credit is also tax deductible. Also any portion of home loan that is over 100% loan to value ,is not deductible. if you have a second home the interest maybe deductible, if you have lived in the home at least 14 days .
3. Property Tax :
Property Tax is almost always tax deductible.
4. Residential energy efficient tax credit.
If you made your home energy efficient by installing insulation or energy efficient appliances, you can claim credit, upto $500 can be claimed if you did it by Dec 2015.'
5. Renewable energy Tax credit
If you installed equipment that uses Renewable energy, for example to power your home through sun or wind, you can also claim credit upto 30% of the cost of the appliance, installation included. You have to have the appliance or equipment installed by Dec 2016
6. Ground Rent Tax credit:
In instnaces where you own the home but the land your home is sitting on, is not yours, and you have to pay rent, which can be monthly or annualy. Then that is Ground Rent and it is deductibe if the lease is more than 15 years. But if you are paying the rent to the owner to capitalize on it, as rent to own, or in other words to buy out the lessor's interest from it, then it is not deductibe.
7. Income and interset on reverse mortgage :
The money that you receive from the reverse mortgage, is not deductible, but the interest accrued on the mortgage is not deductable until the loan is paid off. So you cant take the yearly deduction on interest just like the regular mortgage.
8. Private mortgage Insurance
You can maybe claim deduction for the Private mortgage Insurance, which is connected to mortgages like FHA. It was extended to the end of 2016. It also depends on your income, if your income is above $109,000, you cannot claim the deduction.
9. Home expense and Improvement:
If you made improvements on your house, you will not be able to deduct the cost and labor of the improvement , but can maybe claim deduction on the interest ,if you took out a home loan to pay the , for example, the contractor. Later, when you sell the home you can add this cost to the asking price to reduce the capital gain.
10. Buying a home.
The IRS does allow first time buyers to withdraw upto $10,000 from their IRA account, penalty free, and then can get help from a close relative like son, father or mother etc another $10,000 from their IRA, as help to buy the house. You must use the money to buy, or build or improve your first residency within 120 days of the withdrawl.
Again, this is just some ideas, your accountant can tell you more and more specific about the tax deductions, that you can use when you buy or do improvements in the house.
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Asifa Zia
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