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Feeling Lucky, Homeowner? You May Qualify for a Pot Full of Tax Deductions!

Feeling Lucky, Homeowner? You May Qualify for a Pot Full of Tax Deductions!

We recently celebrated Patrick’s Day, but if you’re a homeowner, you may not need the luck of the Irish when you’re submitting your income taxes this year. Homeowners make their own luck when they decide to purchase a home – particularly when tax season rolls around.

There are specific tax breaks that are exclusive to homeowners. If you’ve not yet filed your 2015 tax return, take a moment to confirm you’ve received every homeowner tax break you’re eligible for.

Here are a few common homeowner-friendly tax deductions:

Mortgage Interest: Unless you’ve paid cash for your home, you pay mortgage interest all year long. As long as you’re not living in a multi-million dollar home, you’re likely eligible to deduct each and every one of the interest payments you make throughout the year. In fact, you may be able to take this deduction even if you own more than one home!

Property Taxes: Onto another deduction that homeowners pay throughout the entire year. But, this one has no limit. Homeowners are able to deduct the entire amount of property taxes they pay in a year’s time.

Private Mortgage Insurance (PMI): If you bought a home after 2006, but didn’t put down 20% of the home’s cost, you are probably paying PMI along with your monthly mortgage payment. During the time that you’re paying PMI to get to that 20%, you may be eligible to recoup some of those payments through an annual tax deduction.

Points: If you bought a new home in 2015, you probably were charged a lender fee called points.” It’s a fee that’s equal to one percent of your loan amount. A lender may charge a number of points to lower your interest rate or simply for processing your loan. Regardless of why your lender charges you those points, know that you can deduct them at tax time.

Home Equity Loan Interest: This one is probably more for seasoned homeowners. If you’ve taken out a home equity loan, you’re able to deduct some of the interest you pay on it. Typically, that deduction cannot be more than $100,000.

Selling Fees: Though we are primarily talking about tax breaks for homeowners, there are certain tax breaks for home sellers, as well. If you sold your home in 2015, consider deducting a lot of the costs that go along with the closing process. Things like real estate agent commissions, legal fees, advertising fees and inspection costs are all tax deductible.

While the aforementioned list is full of common homeowner tax deductions, the following two possible tax breaks may be in need of further detail, or at the very least, an asterisk!

*Home Improvement Deductions: No, you can’t just deduct the cost of that major kitchen remodel or the new hot tub you added last year. But, there are certain home improvements that are tax deductible. If you made any improvements to your home that were required for medical reasons, you may be able to take a deduction for them. If the home improvements that you made were considered capital improvements, or those that would increase the overall value of your home, they may actually be tax deductible as well.

*Home Office Deductions: For those homeowners who work at home, this can be a rather handsome deduction! Not only are you able to deduct a portion of your home insurance, but you also can deduct a portion of the utilities and a portion of your home’s depreciation. Why the need for an asterisk here? To qualify for this deduction, you must use a particular portion of your home exclusively for business.

When tax time rolls around, who doesn’t want to that pot full of deductions at the end of the rainbow? Homeowners certainly are no exception to that rule! If you’re a homeowner who is preparing to file your 2015 tax return, make your own luck this tax season and discuss a few homeowner tax break options with your accountant or tax preparer.  

This post is sponsored by PA Preferred Mortgage:

Pennsylvania Preferred Mortgage is a full service mortgage banker and is a member of the Prosperity Home Mortgage, LLC family. Specializing in residential and refinance loans, Pennsylvania Preferred Mortgage offers a wide range of mortgage products, including fixed and adjustable rate mortgages, jumbo loans, Federal Housing Administration (FHA) and Veterans Affairs (VA) loans, and renovation financing. Learn more at www.papreferredmortgage.com.