Although renting is becoming the standard, especially in major cities (65% in some), homeownership comes with its perks no matter where you live. Read below to understand the many tax benefits of owning a home, whether you are already a homeowner or are saving to become one.
What to deduct…
This is the most common deduction taken. Be sure to include any taxes you reimbursed the seller for – these taxes were paid before you took ownership. Instead of getting a 1098 report, the amount will be shown on the settlement sheet.
Mortgage/Home Equity Interest
For mortgage interest, this goes for your primary and secondary residence (which doesn’t even have to be a house). There are limits, but few taxpayers reach it. Further, you can deduct the interest on up to $100,000 borrowed on a home equity loan or home equity line of credit.
Mortgage Insurance Premiums
This only goes for policies issued after 2006. An important note – unless Congress renews this deduction, 2016 is the last year it can be claimed.
You may have paid points to get a better rate on your home loans. You can deduct points in the year you paid for them if the loan was used to purchase or build your main home. This applies to a refinanced loan as well, but in most cases the points must be deducted over the life of the loan.
Certain Home Improvements
If you had to make home improvements required for medical care, such as a wheelchair ramp or bathroom renovations, you can deduct these costs.
You can save a significant amount on your taxes, but the number depends on many factors, such as your filing status, your standard deduction amount, your other itemized deductions, and your taxable income. Most homeowners have to do itemized deductions to reap the full benefits, so prepare for a slightly more strenuous and complex filing season.