Owning a home is expensive, but this large investment can actually help you when it comes time to file your taxes. It’s important to keep detailed records and receipts so you’re able to take advantage of the variety of deductions and credits available. Here’s a look at five tax breaks that every home owner should look into!
- Construction Loan Interest: The good news is that tax breaks don’t just apply to existing homes. If you’re planning to build a new home and require a construction loan, you might qualify to deduct the construction loan interest for the first 24 months of the loan.
- Mortgage Insurance Premiums: For home owners with a loan-to-value ratio of more than 80 percent, lenders generally require you to carry mortgage insurance. This protects them should you default on the loan. While it’s an added expense, you can deduct the amount if your adjusted gross income (AGI) is less than $100,000 or $50,000 if you’re married and filing separately.
- Energy Star: Energy Star appliances and fixtures have become popular thanks to the continued interest in green living. But not only will they help you be a better friend to Mother Nature, they could also put more green in your pocket when it comes to filing your taxes. Energy Star-rated doors, windows and skylights that are installed at your primary residence could give you a tax break of 10 percent of the total cost of the products. They must be installed before the end of the year, and the tax credit does not extend to installation.
- Mortgage Interest Deduction: Do you have a loan on your home? If so, you should be taking advantage of the Mortgage Interest Deduction (MID). It’s one of the best tax breaks for home owners, allowing you to deduct the amount of interest you pay towards your loan. You will need Form 1098 to claim this tax credit, which you can obtain from your lender.
- Property Taxes: Many home owners don’t realize that they can deduct both state and local property taxes if they’re based on the assessed value of the real property. Start by determining whether you pay your property taxes out-of-pocket or via an escrow account. If you pay them yourself, look for your bills to determine how much you spend, and if you pay from an escrow account, you can find the information on Form 1098