As the New Year begins, the 2014 tax year ends. This is the time of the W2, the 1099, and for those who own a home, the 1098. It’s time to fill out your forms and begin to organize your taxes in an effort to maximize your savings. There are many parts of the U.S. tax code that give breaks to those who own homes. Keep reading to make sure you don’t miss any tax deductions for homeowners.
Mortgage interest paid
Mortgage interest paid to a lender is tax deductible. This can provide a substantial tax break for homeowners. In the first ten years of a 30-year fixed loan, interest payments exceed principle payments. There are a lot of potential savings with interest payments, especially in the early years.
This tax break is even available for second mortgages. However, there is a one-million-dollar limit. Loans that exceed $1,000,000 are not eligible for the tax break.
If you’ve financed a home, or are looking to do so, you’re no stranger to discount points. They are fees attached to your loan that are equal to 1% of the loan balance. They can help lower your mortgage rate in order to save money in the long run. The ins and outs of this tax break are complicated, so you’ll have to talk to a tax expert in order to get the best information for your situation. Just make sure to bring up any discount points you’ve received so you don’t miss out.
When you pay real estate taxes to local and state entities, you have the opportunity to deduct these expenses from each tax year. If your mortgage lender currently escrows your taxes and insurance, you will receive an annual statement to file with your federal tax returns.
There are certain home improvements that are tax deductible. These usually include “green” renovations. The rule of thumb is that if it lowers your utility bill, it might be deductible. Additionally, renovations that are put in to accommodate a chronically ill or disabled person are usually 100% tax deductible.
Find more information about what you can and cannot deduct as a homeowner on the IRS website here.