Tax day was just over a month ago, and if you are a first-time homeowner, chances are high that you didn’t take full advantage of the tax breaks available to you. With that in mind, here are four tax breaks that homeowners can take advantage of going forward.
1) Mortgage Interest Deduction — The mortgage interest deduction is not only the most popular real estate tax break, but one of the more straightforward. In short, 100 percent of the interest that you pay on your home loan in a given year is tax deductible. Recent home buyers will be the most excited by this deduction given that, in the beginning, mortgage payments consist almost entirely of interest.
2) Property Tax Deduction — Like mortgage interest, property taxes paid to your local or state government in a given year are fully deductible. However, to take advantage of this deduction and the one above, the property in question must be your primary residence.
3) Energy Efficient Renovations — If a renovation of your home includes the installation of energy-efficient products or mechanisms, you are likely eligible for a tax credit. Homeowners can receive a credit for the installation of solar panels and water heaters, geo-thermal heat pumps and a number of other improvements. This form provides a more detailed explanation of the credits.
4) Mortgage Points Deduction — Mortgage points are essentially a form of pre-paid interest on a home loan. When Freddie Mac issues its mortgage rates each week, the published average usually includes an average “point” that the lender will charge. That point translates into a percentage of the total loan that the borrower must pay up front in order to get the latest interest rate. Homeowners can deduct all the points paid on a home loan in a given year. More details and requirements for this deduction can be found here.
For more information of real estate-related tax deductions, check out this IRS document.
Correction: An earlier version of this article included a section that said private mortgage insurance was deductible. While that deduction was available to homeowners in 2013, it is no longer the case in 2014.
This article originally published at http://dc.urbanturf.com/articles/blog/the_top_5_tax_breaks_for_homeowners/6930
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