Tax season is here, which means it’s time to take a look at all the places you can get deductions, starting with your home. We recommend always working with a tax professional as these deductions can be a little tricky.
Review your property taxes
So long as your property taxes are going to government or community and not as payment for a service or privilege rendered to you, you can deduct these imposed taxes. Imposed taxes mean you paid real estate tax at closing or settlement of the property or if you paid throughout the year to a taxing authority (directly or through an escrow account). When visiting with your tax preparer, be sure to bring your annual escrow statement (if you have one) and form 1098 which your bank should have sent you. Both of these documents show the actual taxes you’ve paid, allowing your tax accountant to prepare your deductible accurately.
Take a look at your mortgage’s interest
There are some limits to deducting interest paid to your mortgage but in most cases, you can deduct the interest on your main residence as well as a secondary home. Speak to your preparer to see if you qualify.
Investigate your private mortgage insurance
If you put down less than 20% for your home, you just may be able to deduct some of your PMI payments. To qualify, you must have received your home after 2007 and the PMI must be on your primary residence (it can also be on your second home, so long as that property is not used as a rental). Your annual gross income must also not exceed $109,000 ($54,500 for married filing separately).
Also note that once you have 20% equity in your home, you can also cancel your PMI, saving you money as well. Similar to the property taxes, file your PMI deductions on Form Schedule A.
Evaluate your office space
Do you work from home? If you are self-employed or work from home as an employee, you may be able to deduct the home costs related to your work area (insurance, repairs, etc.). The deductible amount is related the percentage of your home that is dedicated to business.
You can get a tax deduction when you sell your home too
All selling costs (like title insurance, broker commissions, escrow fees, etc.) can be deducted from your home’s gain. The gain is the selling price minus the selling costs, your tax basis, and closing costs. A good tax accountant can review your home purchase information and help get you the best tax deduction possible.
Have you done these things in the past to get more tax deductions on your home? If not, give them a try this year!