Two months ago winter was in full force and though we knew tax time was approaching, it was still February – there was plenty of time. Today the first week of April is nearly gone, and though the early birds have already processed their taxes and spent their refunds – there are those that are only now collecting their forms and receipts, settling down and doing their taxes.
Home ownership is a big plus when it comes to tax time. The government is generous with tax deductions for homeowners, and these deductions are advantages that will reduce your tax bill. Here are a few to consider.
Mortgage interest is any interest that you pay on a loan secured for your main home or a second home. The loan can be a mortgage to buy your home, a second mortgage, a line of credit or even a home equity loan. This interest can be used as a tax deduction. Interestingly, this tax deduction applies if you pay interest on a condominium, cooperative, mobile home, boat or recreational vehicle used as a residence.
The IRS considers points on a conventional mortgage as prepaid tax. One point is equal to one percent of the principal loan amount. Either the buyer or seller or both may pay these points, and these can be used to cut your tax bill. The trick is to know if you can deduct the points all at once or if you have to spread the costs over the life of the loan. There is good information on some of these advantages in the IRS Tax Information for Homeowners guide.
Another tax break is available from paying your property tax on your home or other property that you own. You need to deduct the real estate tax for your main home or other non-rental/non-business property on Schedule A. Remember property tax is deductible in the year you paid it, not necessarily the year that the payment is due.
There have been many energy efficiency tax breaks over the years. For example, if you installed storm doors or insulation or new energy efficient windows in 2015, you can get a tax credit of $500. This credit is expiring on December 31, 2016.
The IRS offers incentives to first time home buyers by allowing the withdrawal up to $10,000 from a traditional IRA without penalty. This can be a great help with the purchase of your first home. As an added bonus, your spouse or parents can put an additional $10,000 from their IRA for a total of $20,000 without penalty.
As tax time approaches, I highly recommend that you speak to a tax professional and ask about the advantages you may have as a homeowner. A tax professional will be able to answer all your questions and guide you thereby saving you time and money.
Homeownership is a bonus in more ways than one; if you’re looking to buy a home, please reach out to me. I am here to help with any questions you have. Call my cell phone (541) 390-0595 or email me at selenamcneill@yahoo.com. You can also explore my website at www.selenamcneill.com
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