Becoming a homeowner means you not only gain a home, but also a lot of tax advantages.  Many of your home-related expenses can be deducted for any type of home: mobile, single-family, townhouse or condos.  Be sure to consult your tax advisor so that you can be sure to find out which deductions apply to you and your home, so that you don’t miss out on any!  Here are some common ones that may be beneficial to you.

Deducting Loan Points Paid on a Purchase or Refinance

The points you pay on a loan for a home purchase are tax-deductible for the year you made the purchase. You can deduct the points you paid as well as those a seller paid on your behalf if you meet the following criteria:

  • The loan is secured by your primary residence
  • The loan was used to buy, improve or build the home
  • Paying points is a common practice in your geographic area
  • The points are calculated as a percentage of the loan principal
  • The points are clearly outlined on the settlement statement; and the amount of cash you put into the purchase of your home (down payment,   closing  costs  etc.) is at least equal to the amount you were charged for the points you paid on the loan.

Deducting Real Estate Taxes

Real estate taxes are deductible in the year they were paid. They are generally reported on Form 1098, Mortgage Interest Statement, the annual statement from the financial institution holding your mortgage, or on your county real estate tax assessment statement. You should also deduct any prorated taxes collected from you at closing. These amounts are not always included on Form 1098, but may be itemized on your real estate closing statement.

Casualty or Theft Loss

If your home is damaged from a sudden, unexpected event such as a fire, a storm, vandalism, or theft, the loss that is not covered by insurance is deductible subject to a $100 reduction and a 10% of adjusted gross income limitation. A deductible casualty or theft loss reduces the cost basis of your home by the amount claimed as a deduction. The deductible loss is calculated using Form 4684, Casualties and Thefts, and carried to Schedule A as an itemized deduction.

Going Green Means Tax Benefits

Homeowners who make their homes more efficient with energy-conscious purchases may be eligible for tax benefits. A recent tax law change provides a tax credit to improve the energy efficiency of existing homes. The law provides a 10 percent credit for buying qualified energy efficiency improvements. To qualify, a component must meet or exceed the criteria established by the 2000 International Energy Conservation Code (including supplements) and must be installed in the taxpayer’s main home in the United States.

The following items are eligible:

• Insulation systems that reduce heat loss/gain

• Exterior windows (including skylights)

• Exterior doors

• Metal roofs (meeting applicable Energy Star requirements)

In addition, the law provides a credit for costs relating to residential energy property expenses. To qualify as residential energy property, the property must meet certification requirements prescribed by the Secretary of the Treasury and must be installed in the taxpayer’s main home in the United States. The maximum credit for all taxable years is $500 – no more than $200 of the credit can be attributable to expenses for windows. Read more from the IRS on how you may be eligible to receive this tax break.

Each case is different and it is possible you will actually qualify for other deductions you were unaware of, so check with your tax professional so they can help you get the best return! For information on taxes and being a homeowner, visit the IRS where you can learn more about Tax Information for Homeowners.

Tax season is here, as a homeowner you taking advantage of any tax breaks this season?