As many of us prepare to file our federal income tax returns in the coming weeks, we should be looking for every deduction we can find and that we legally have coming to us. For those who own a home, it can be the source of several different deductions.
Read on to learn some of the common federal income tax deductions related to home ownership. Keep in mind that to receive these deductions you have to claim itemized deductions on Schedule A, as opposed to using your standard deductions.
Mortgage and Home Equity Line of Credit Interest
Interest paid to a bank for a home mortgage or for a home equity line of credit (or HELOC) is deductible from federal income tax. This includes mortgage interest paid throughout the year as a part of monthly mortgage payments as well as at the time of closing.
Points are often paid at the time a home mortgage is signed to reduce the interest rate, because the money paid up front will save the homeowner money in the long term. The amount paid for points is deductible on your tax return.
Once you own a home, you will have to pay property taxes based on the state, city, county, and school district where your home is situated. These taxes are deductible from your federal income tax in the year they are paid to the state or local entity.
Home Office Expenses
If you have a small business such as direct selling and use a room of your home for the running of that business, you can deduct certain expenses related to the business from your federal income tax. The expenses you can deduct include repair and maintenance costs related to that room as well as a portion of utilities and insurance based on the percentage of your home that the home office room comprises.
Mortgage Insurance Premiums
When someone buys a home but pays a down payment of less than 20 percent, the homeowner is required to pay for mortgage insurance. Mortgage insurance guarantees the bank will receive the mortgage balance owed in the event the homeowner defaults on the payments.
The premiums paid for mortgage insurance are tax deductible.
Home Selling Costs
Certain expenses paid related to the sale of a home, including fees paid to a realtor and repairs, are tax deductible if they are made within 90 days before the sale of the home.
How to get Help Preparing Your Federal Income Tax Return
The information above is general in nature and should not be considered legal advice. If you have questions about preparing your federal income tax return and deductions that you may qualify for, you should speak with a tax attorney. A tax attorney is trained to know the tax law. He will be able to review your individual situation to know how the tax law can benefit you.
If you provide your information by entering it in the form on this page or by calling the telephone number above, a tax attorney will get in touch with you. The initial conversation is free of charge and does not obligate you to anything further, and all conversations with an attorney are completely confidential. Therefore, you have every reason to get in touch with an attorney today to get the help you need.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.