Facebook Share Twitter Share Google+ Share Linkedin Share Pinterest Share
Spring Break for Homeowners: Are You Eligible for Valuable Tax Deductions

Spring Break for Homeowners: Are You Eligible for Valuable Tax Deductions

Spring isn’t the only season that has sprung upon us lately; we’re in the middle of tax season and if you’re a homeowner, tax time can be a very good time for you. It doesn’t matter if you own a townhome, single family home or condominium, there likely are valuable tax deductions that you can take advantage of.

First and foremost, there is the simple question that many homeowners ask when it comes to tax time: Should I itemize or claim standard deductions? For some homeowners, it can be more valuable to itemize deductions, but it can also be more complicated. For advice on what is best for you, consult with your tax preparer.

If you decide that itemizing is the route for you, here are a few questions to reference when it comes to home expenses that may or may not be tax deductible for homeowners this year:

Do You Pay Monthly Mortgage Interest? Whether you own a home as a primary residence or for vacationing, the good news is that all of the interest you pay each month should be tax deductible. The same goes for refinanced mortgages and home equity loans. However, if you are mortgaging more than $1 million, you may be out of luck when it comes to deducting monthly mortgage interest. Of course, there are some other restrictions, so it is always best to consult with a tax professional to find out what mortgage interest you can and cannot deduct.

Do You Pay Property Taxes on Your Home? While it is a silly question to ask, typically, homeowners can look forward to deducting the cost of their property taxes each year. For new homeowners, there is usually an additional deduction for tax costs that were settled during the closing process.

Did You Buy Points to Lock in Your Loan Rate? Again, whether you bought points to lock in a rate on your home, to refinance your home or for a home equity loan this year, you may be looking at a nice tax deduction on what you paid for those points. As with any deduction, rules apply when it comes to making deductions for points. For instance, points paid on refinanced loans and home equity loans may only be deductible as you pay them, while points paid on a new home may be deductible in one lump sum during the year that you paid them. Your tax accountant will be able to confirm how you may deduct any money you paid for points in 2013.

Did You Sell a Home in 2013? While you may no longer own the home that you did in 2013, you may still benefit from the sale of that home. Currently, any gains on the sale of a home that are under $250,000 per person or $500,000 if you are married and filing jointly, are tax free as long as you lived in your home for at least two of the last five years. If you lived in your home for less than two years, there may still be hope for a pro-rated tax-free gain, if you sold your home for health or employment reasons. Some of the other costs associated with selling a home, like advertising and realtor fees, are tax deductible also. A certified tax accountant can help you discern just what all of those deductible fees are.

Do You Pay Private Mortgage Insurance (PMI)? If you bought your home between 2007 and 2013 and were not able to put down a full 20%, it is likely that you are paying PMI each month. The good news is that PMI counts as a tax deduction… for now. The bad news is that it may not for long, unless Congress extends the law that grants it. As with any tax deduction, when it doubt, check with your tax preparer.

Did 2013 See You Going Through Foreclosure or a Short Sale? Like the tax law that governs PMI, the Mortgage Debt Relief Act, which governs whether or not a canceled debt is to be counted as taxable income, expired at the end of 2013. So, while those canceled debts may not have to be counted as taxable income in 2013, the future of the law remains unclear.

Do You Have a Home Office? As if having the flexibility of working from home was not great enough, another perk of working from home is that the very space that you work in is tax deductible. This deduction can include the phone you use for work and the utilities you pay for that workspace; however, a tax accountant can help you decide what portion of those costs can be deducted.

Did You Experience a Loss in 2013? While you certainly don’t want to dwell on your losses, if a natural disaster or crime caused you to suffer a loss in 2013, you may be able deduct a portion or the full cost of your loss; of course, there are tax rules that govern these deductions, also. To take advantage of a deduction for a loss, be sure to keep receipts and consult with a professional on what you may qualify for.

Did You Upgrade Your Home in 2013? For the most part, home repairs and home improvements are not tax deductible expenses; however, there are still cases where they may be. If there was a medical reason behind your home improvement, those costs may be fully tax deductible. If you installed energy-efficient doors or windows in 2013, those green energy costs may be tax deductible as well. But, again, this may be the last year for the green energy deduction, if Congress does not extend the credit.

Are There Any Fees that Definitely are Not Deductible? Yes, there are a lot of tax deductions that homeowners are able to take advantage of; however, not every cost related to home ownership qualifies as a deduction. A few fees that absolutely are not deductible include property hazard insurance, home owner association fees, home depreciation and most general closing costs.

Without a doubt, the spring tax season can be an advantageous time for homeowners, but it certainly raises a lot of questions about what deductions homeowners are eligible for. While the above information may serve as a great guide for what deductions you can qualify for, it is always best to consult with a professional tax accountant before filing your taxes.