Six Tax Breaks Every Homeowner Should Know
Buying a home is a great investment, however, you need to itemize your taxes in order to take advantage of all the tax breaks that come along with it. It can be overwhelming, so be sure to check out the top 6 tax breaks for homeowners below:
- Mortgage Interest Deduction: This will be your highest tax break as a homeowner. When you first purchase a home, the majority of your monthly payment goes towards interest. Therefore, you can deduct all of the interest from your mortgage from your taxes. Refer to the Form 1098 that was sent from your lender which indicates how much money was paid in mortgage interest that year.
- Mortgage Insurance Premiums: Mortgages with a loan-to-value higher than 80% must also pay PMI (Private Mortgage Insurance). You may be able to deduct the amount that you paid towards this insurance.
- Energy Star: If you have installed energy-efficient windows, doors or skylights before the end of the year, you may eligible for a tax break. They must have been installed at your primary residence and meet Energy Star program requirements. If you meet these requirements, you can qualify for a tax credit of 10% of the cost of the products ($200 cap for windows/skylights and $500 cap on doors.)
- Points: Points are the charges or fees the borrower paid toward the home mortgage. If your home is a primary residence and you didn't pay excessive points, then you can deduct these charges in the year you paid them.
- Property Taxes: You can deduct your state and local property taxes as long as they are based on the assessed value of the home. Most homeowners pay through an escrow account then the information appears on Form 1098.
- Construction Loan Interest: You may qualify to deduct the interest (up to 24 months of the loan) if you took out a construction loan.
Contact your tax advisor for questions and if you need a recommendation for a local tax advisor, please give me a call and I would be happy to help you. *Article courtesy of FoxBusiness.com