No matter how you slice it, homeowners have benefits that renters do not. When you own your own home, you have a place to call yours and your home becomes an investment, an asset. However, the benefits don’t end with money in the bank; there are others that come in the form of dollar signs and savings straight from Uncle Sam. Do you know what you should be deducting?
Mortgage interest
Your mortgage interest (on your full time residence) is 100 percent tax deductible, and you don’t have to do any complex math to find out how much you can subtract from your 1040.
Paid mortgage interest for the prior year is reflected on the annual tax statement sent from your lender or on your lender’s website. Even for homeowners with a low mortgage interest rate, this deduction is usually a hefty one.
Property Taxes
Property taxes paid during the prior tax year on your full time residence are also 100 percent tax deductible on your federal return. To find out how much you can deduct on your property taxes, review your mortgage interest statement (if you have an escrow account) or visit the county tax assessor’s office online or in person for a summary.
Home Improvements
The IRS and local government offices list tax credits and incentives for home improvements that boost energy efficiency. Even though incentives for upgrades and available tax credits will vary from one city to the next, there is plenty of money available to claim for new windows, doors, insulation, solar panels, solar hot water heaters or radiant roof barriers in your home. If you have questions, consult a tax professional regarding the most up to date information and qualifications in your area.
Closing Costs On a Purchase or Refinance
If you refinanced your current home, or bought a home that was new to you in 2011, many of your closing costs are deductible. Homeowners can reduce what they owe Uncle Sam when deducting things like origination fees, prepaid mortgage interest or prepaid property taxes. In some cases, new homeowners are also able to deduct down payments and other moving costs.
Before you file, review the IRS Publication 530 for more details and information on closing cost deductions that apply to your unique situation.
These small deductions might not seem much on their own, but they add up to considerable savings, making owning a home a solid investment, even in a soft market.
Shauna Zamarripa - Accomplished journalist with a background in background in real estate, finance, social media and marketing.
