In the USA Today, there was an article about tax breaks I would like to review. It had some great information for homeowners and potential home buyers to keep in mind. There are numerous tax breaks given to homeowners every year. These are the main ones:
1. Mortgage Interest – It’s tax deductible! This is the most lucrative way to save some mullah come tax season. It is even more important for new homeowners and those who refinance recently as their payments are mostly interest. (For those not familiar with how a mortgage payment works, at the beginning of the payment period the payments mostly consist of interest payment. As time goes on, the payments will include more and more principal. So, even though the total monthly payment remains the same, you do not have much equity in your home for several years. This is why it is important to pay a considerable amount of cash when purchasing a new home.
2. Property Taxes – While the exact laws on this differ from county to county, for the most part, property taxes are tax deductible.
3. Renovations Count – Now, not all renovations count. There are certain qualified improvements that are acceptable. Minor repairs, and replacing personal appliances are not included. Improving a home is however included, things like additions to the property, putting in a new pool, or a new privacy fence can be included. These may not be deductible until you sell the home though, so always consult an accountant for further assistance.
4. Unqualified Renovations – As I hinted at before, there are renovations that cannot be deducted immediately, but it may be deductible when you sell the property. By federal law, a single person is granted $250,000 tax-free profit from the sale of their house while a married couple is granted $500,000. Those renovations that you could not deduct earlier can be counted against the profit from the sale of your home to help you get those capital gains down. Now, you must have lived in the home for at least 2 years, but this is a great tax break to take advantage of.
5. Selling Costs – All your costs associated with selling the property are tax deductible. Marketing fees, advertising fees, and broker fees are all tax deductible.
6. Mortgage Insurance – It was a little nerve recking there for a little bit as politicians tried to remove mortgage insurance tax deductions under Obama’s theory on government. Luckily, Congress kept this deduction intact allowing millions of potential homeowners to purchase their first homes by purchasing private mortgage insurance in leu of placing a 20% down payment.
7. Moving Expenses – Don’t forget about those pesky moving costs. Again, there are limitations. To qualify for this deduction you have to have been relocated due to a work related incidence, and it must be more than 50 miles away.
Hopefully you can take advantage of these tax deductions and save some of your hard earned money. And remember, hold onto those receipts as the government may want to see them come tax season. That is all that is happening in the Dr Phillips Real Estate market today. Stay tuned!