08 Feb Tax Breaks For Home Owners
Buying a home is one of the biggest investments you will ever make, but it can also be one of the best if you take advantage of different tax breaks. There are a variety of them available and they can save you big money each year if you’re willing to spend the time itemizing your taxes. Here’s a look at some of the most outstanding tax breaks for home owners!
Mortgage Interest Deduction: One of the best tax breaks for home owners is the Mortgage Interest Deduction (MID). When financing a home, the majority of your monthly mortgage payments go toward the interest, but you can deduct that with Form 1098. Ask your lender for the form, which also explains how much you can deduct.
Energy Star: Not only do Energy Star-rated appliances and fixtures avail you of home owner tax breaks, they can also save you money each month on your utility bills. They cost more money upfront, but the return on investment can be significant for energy-efficient windows, doors and skylights. These items must be installed at your primary residence to take advantage of the deduction, and they have to be in-place by year-end. If you meet the requirements, the tax break is equal to 10 percent of the cost of the products.
Mortgage Insurance Premiums: If your mortgage has a loan-to-value ratio of more than 80 percent, you’re required to carry mortgage insurance to protect the lender against default. Fortunately, you can deduct the expenditure if your adjusted gross income (AGI) is less than $100,000 or $50,000 if you’re married and filing separately. Generally, once you have 20 percent equity in your home, the requirement for mortgage insurance goes away.
Construction Loan Interest: Planning to build a home? If so, you could be able to deduct the interest paid on a construction loan if you qualify. This deduction can be used for the first 24 months of the loan, but it’s permissible for construction to take longer.
Property Taxes: If your property taxes are based on the assessed value of the real property, you would be eligible to deduct both state and local property taxes. This could be a huge savings for you when filing your taxes, but you need to know how you pay your property taxes. If you pay them out-of-pocket, locate your bills to determine the dollar amount. But if you pay them via an escrow account, you can find the information on Form 1098.