Being a homeowner in terms of income tax, can for many be a source of relieving some of that tax burden. While I am certainly not a licensed tax professional and recommend that you seek the advice of one to address your particular situation, I feel that sharing some of the following may be of help in creating awareness that you may be either missing some relief or maybe leveraging a deduction incorrectly. In either case you may find this wisdom well worth the price of reading onward.
- Forgetting to deduct Private Mortgage Insurance. This can be a sizable deduction, but be sure to check income restrictions
- Mortgage Interest – this is usually the big one for most homeowners, just be sure that you are deducting this for the year in which you paid it.
- Property Taxes- for many again this can be a significant number. A strong word of caution here to be sure that you are deducting what you actually paid, not your escrow balance. Escrow balances tend to be either more or less than the actual tax amount in a given year. Again like Mortgage Interest, be sure that you are claiming the correct year.
- Repairs and Improvements- this can be a slippery slope so you really should seek out the advice of a professional on these. Some improvements may be deductible, such as accessibility improvements for persons with disabilities while many are not they may help down the line when you go to sell. Repairs usually are not deductible, however when borne out of damage caused by a natural disaster, they may be. Again please consult a professional.
- Energy Efficient Upgrades-be sure to really study the guidelines around writing these off. Some are limited to 10% of the cost of the upgrade, while others can be up to 100%. Yes doing your part for mother earth may pay off with the department of revenue!
- Points- This one can become confusing and there are several litmus tests to pass to do so but it can be a large number. The use is limited to obtaining a mortgage or a loan to improve your home.
- Investment Property Write Offs- There are a slew of these, but use caution because if the home becomes or is purchased as an investment property and is sold within 2 years there may be capital gains implications. But the list includes: Depreciation, necessary repairs, wages for laborers, utilities and more, but again please check with a professional.
Maybe there were some surprises, maybe not, but it may get you to thinking. For many of us, this time of year finds us looking for deductions, much like going through clothes that you haven’t worn in a while looking for spare change or even dollar bills. Here’s to wishing you a fruitful Springtime and many happy tax returns!