Tax Tips for Homeowners

Whether you were a first-time homebuyer buyer who bought a house recently, a long-time homeowner who refinanced or a seller who has left your house behind, there are several important deductions available to you. The downside is no more simple tax returns, because you’ll have to itemize. But the money you’ll get back from the IRS makes it worthwhile.

Mortgage Interest: If you just bought a home or refinanced in the last few years, the savings are even more significant since more than half of your monthly payment goes towards interest.

Mortgage Insurance Is Deductible: There were fears that the deduction of personal mortgage insurance would disappear. However, Congress thankfully left it in place — which is a huge boon to lower-income homeowners who often can’t afford a big down payment and thus must pay PMI until they have at least 20% equity in their home.

Property Taxes Are Tax-Deductible: It is frequently overlooked, but homeowners can deduct their local and state property taxes on federal tax returns. There also might be special property tax benefits for lower-income homeowners based on your state or municipality of residence, so look into further breaks specific to your community.

Qualified Renovations: Basic repairs and enhancements are not tax-deductible. But items covered under residential energy efficiency can provide tax relief, including new solar panels or certain water heaters. There are also deductions that can be made for home office improvements, as well as write-offs for medically necessary changes such as an entry ramp or a handicap-accessible bathtub.

Unqualified Renovations: While that new addition you built may not be “necessary,” the expense could be an important part of reducing your tax burden when you sell. This is especially noteworthy in hot real estate markets or for homeowners sitting on big property appreciation. The IRS allows you only $250,000 of profit when you sell a primary residence, but you can deduct any renovations that boosted your home’s value from any total profit to get under that threshold. So find those receipts if you’re sitting on a big profit and planning to sell.

Claim Selling Costs: If you sold a home in the past year, costs including title insurance, advertising and real estate broker fees can also be claimed on your tax return. You can even claim certain repairs to reduce your capital gains on the sale, presuming they were made within 90 days of the sale and clearly for the intent of marketing the property.

Don’t Forget Moving Expenses: If you bought a home recently, there’s a chance that you did so because of a job-related move. If this is the case, you might be able to deduct some of those expenses, provided you have the receipts for all of your moving costs. Keep in mind you have to have moved 50 miles or more, and the reasons for your move can’t be personal.