Although it’s still a freezy winter month, April and tax time are on the horizon again, and there are great deductions for homeowners. So browse the possibilities, and contact your tax professional to ask if and when these deductions might apply to you. And consider using your tax refund for a cruise to warmer climates!
- The old standards: Almost everyone knows that the mortgage interest on your home is tax-deductible.
If you have more than one mortgage, you can still deduct the interest on all of them, as long as they don’t exceed one million dollars in total mortgage amount, and the purpose of the mortgage is to buy, build, or improve your home. (That second mortgage to finance your 10th wedding anniversary bash does NOT count!) Don’t forget, your state and local property taxes can be written off against income, but make sure you claim them in the year they were paid, not owed. Another old standard is the PMI deduction. If you bought your home after 2006, and your income is $109,999 or less, you may qualify.
- Just purchased a home? These deductions may not be on your radar, as they aren’t the old standard. Did you know that if you just bought your home that you may be able to get a deduction for the points you paid to buy down your rate? If you bought a home, you can deduct the points for the year you refinanced. (Did the seller pay the points? Check with your tax pro, you may still qualify to deduct them!) And if you moved more than 50 miles when you bought your new home, some of your moving expenses may also be deducted.
- Refinanced? You’ve got possibilities, too! You can’t deduct your points all at once, as it’s written off over the course of the loan, but you can deduct 1/20th of the points you paid on a 20 year loan each year over the life of the loan. Every little bit helps, and this one keeps helping for years.
- Did you sell your home this year? Every two years, single homeowners can have a tax-exempt profit of up to $250,000, as long as they lived in the home as a primary residence during two of the last five years. Married homeowners aren’t left out, they can have up to $500,000 of tax-exempt profit on the sale of their primary residence.
- Did you make improvements to your home this year? Keep your receipts, invoices, and records. Although the expenses can’t be deducted directly, they can help you prove your home’s worth and value when it comes time to sell…that can help you both with the selling price, and proving what was profit and what was value when it comes time to pay capital gains taxes after the sale of your home someday.
- Did you make any improvements for a family member with a chronic illness or disability? As long as the improvements are to accommodate a medical need and don’t add to the value of your home, you can deduct them. Ramps, bathroom fixtures, changes in counter heights, and air filters are all deductible, but consult your favorite tax pro about items like pools, additions, and air conditioning.
- Speaking of pools and air conditioning, do you have a vacation home? Your state and local property taxes, points, and mortgage interest may also be deductible for your second home.
- And since we balance work and home, do you work AT home? An office in your home that is used strictly for business can be beneficial to your tax bottom-line. (The family room that doubles as an office does NOT qualify for deductions!) For a dedicated office though, any costs for maintaining the office, such as paint, carpet, and a proportion of your utilities, can be deductible.
Here’s wishing you all smooth sailing through this tax season!
A big thank you for the “tax facts” to:
Chuck Lehman, CPA
Lehman Bookkeeping Solutions, Inc
PO Box 328
Milford Center, OH 43045