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April Showers Bring Homeowner Tax Deductions

April Showers Bring Homeowner Tax Deductions

We know. We know. April showers bring May flowers; but, before we are able to enjoy all of the sure signs of spring around us, Tax Day will be reigning down. This year, the deadline for filing your 2016 income taxes is April 18th. That means you’ve got a little more time to take care of this annual fiscal duty.

To help any of you procrastinators out there to make the most of this tax season, we’ve compiled a list of tax deductions that are designed for home owners. Here are eight ways you can manage to pay Uncle Sam a little less, all thanks to owning a home:

1. Deduct mortgage interest. Throughout the life of your home loan, a portion of your mortgage payments goes toward the principal loan balance and another portion goes toward the interest that accrues. To lessen your tax burden, you are able to deduct the interest you pay each year. This tax deduction even applies if you own more than one home, as long your second home is not a rental property. If you are a single filer and your mortgage is over $500,000 or you are filing jointly and your mortgage is over $1 million, you do not qualify for this tax break.

2. Deduct points paid to a lender. If you bought a home, refinanced your home or obtained a home equity loan in 2016 and you paid your lender upfront money to lock in a better interest rate, you should qualify for another tax break. You can write off the points you paid to lenders, but the tax break varies in each situation. Those who purchased a new home can deduct the entire amount. Those who refinanced or got home equity loans must spread their deductions out over the life of their loans.

3. Deduct property taxes. As a homeowner, you probably recognize that part of your monthly mortgage payment goes to paying state property taxes. Don’t forget to account for those taxes when filing your income taxes. Because state taxes vary depending on where you live, some home owners may see a sizeable deduction at tax time.

4. Deduct private mortgage insurance. If you put less than 20% down on your home when you bought it, you may be paying private mortgage insurance. If that is the case for you, take advantage of your opportunity to write off those payments when you file your 2016 income taxes. As of now, Congress has not reinstated this deduction for 2017, so you don’t want to miss it while it is still available!

5. Take advantage of energy-efficient upgrades. This time of year, it may feel like Uncle Sam is only after your green. But, in fact, he also recognizes your efforts to go green! If you installed energy-efficient features in 2016, you may earn dollar-for-dollar savings on your purchases. Just some features that may apply for the tax credit include insulation, windows, doors, hot water heaters and roof materials.

6. Capitalize on your home office. Many homeowners may also have home offices. If you are a homeowner who does freelance work or is self-employed and you have a designated office at home, you may be able to deduct a considerable amount of your business expenses. A portion of your home’s square footage (the size of your office), utility bills, mobile phone bill and internet bill are deductible.

7. Account for any significant losses. If your home or property was damaged in 2016, due to things ranging from floods to vandalism, and your losses were not covered by insurance, you may be able to recoup some of the money you paid out of pocket. If you paid more than 10% of your gross income in order to repair your home, you may be able to write off your expenses.

8. Take advantage of the Mortgage Forgiveness Debt Relief Act. For at least another year, homeowners whose mortgage debts were cancelled, due to a foreclosure or short sale, will not have to count forgiven debt as income – at least up to a couple million dollars. But, there are a few catches here: the reduction only applies to principal residences; those who take this reduction cannot claim any other losses; and, Congress has not renewed this act for 2017.

So, what are you waiting for? Get your deductions in a row and file your 2016 income taxes. Then, you can enjoy the rest of what spring has got to offer! Oh – and, if you’re expecting to see a refund this year, due in part to some of these homeowner tax breaks, here are a few ways to shower your home with some love this spring!

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.