The tax deadline is fast approaching and hopefully you’ve already filed your taxes this year. If you are a new homeowner, were you able to take advantage of the many tax breaks that come along with home ownership? Tax breaks on owning a home range from mortgage interest deductions to home improvements made on your house. Thinking you might have missed a few of these breaks? Keep reading, we want to make sure that you are prepared for the next tax season.
According to TurboTax, here are a few tax items that you may need to pay more attention to when filing your taxes:
- Mortgage Interest
When it comes to most homeowners, one of the biggest tax breaks comes from deducting your mortgage interest. Did you know that you can deduct mortgage interest on up to $1 million of debt that is used for purchasing or fixing up your home? The Form 1098 will be sent to you from your lender that lists the mortgage interest that was paid the previous year – this is the amount that you will deduct. You can even deduct this amount if your lender does not include it on the 1098. Check your files to make sure you are reporting accurately.
- Real Estate Taxes
You can also deduct local property taxes that you pay out each year. This amount is also on the form that is sent to you by your lender, but only if you pay your taxes through an escrow account. If you pay your real estate taxes directly to the city, then check your records for the appropriate amount to deduct.
- Home Improvements
Save all of your receipts and make sure to keep record of all the home improvements that you make on your house throughout the year. Such improvements include: landscaping, storm windows, fences, the addition of energy-efficient items and any new additions to your property. You aren’t able to deduct these expenses while you own your home. Once you sell, the cost of the improvements is added to the purchase price of your home which is used to determine the cost basis of your home. This cost basis is then used for tax purposes, which will help to limit a possible tax bill.
- Mortgage Insurance Premiums
If you made a down payment of less than 20 percent of your home’s total cost, then you’re most likely paying a mortgage insurance premium. Mortgages issued in 2007 or after, can deduct premiums. However, this tax write-off phases out as adjusted gross income increases above $50,000 on married filing separate returns and above $100,000 on all other returns.
Tip: By filing your taxes a little earlier in the year, this helps to better prepare you for any bumps in the road with your filing process. Take the time to make sure that you have all of your deductions together and work with a tax professional if you have any questions on how to get the most out of your deduction.
Note: This information is applicable to the 2015 tax year.
Do you have any tips for home ownership tax breaks? Share with us in the comments below.