With April 15 coming up on our heels next week here are a few things to consider.
Owning your own home is a big responsibility and at times it can be a lot of work. Fortunately, there are some great tax advantages for owning, in addition to having a place of your own.
1. Mortgage Interest Deduction: This has long been one of the most valuable deductions for homeowners, especially with a new mortgage where the payments consist of mostly interest.
2. Home Improvement Loan Interest: The same way your mortgage interest is deductible, so can be the interest on a home improvement loan. Consult your tax advisor because some wear and tear items such as carpet and paint may not qualify.
3. Mortgage Points/Origination Charges: These charges are treated similar to interest on the loan, making them deductible. Consult your tax advisor because the deduction is treated differently depending on if the charges were for a refinance or a purchase.
4. Energy Efficiency Upgrades: Up to 10 percent of the improvement cost can be applied as a tax credit, which is a direct reduction in the amount of tax you owe. There are a wide variety of items such as energy efficient appliances, furnaces, insulation, and windows. Be aware that this credit does max out at $500.
5. Capital Gains Exemption: If you were to sell a home and realize a profit you can claim that profit tax-free. Be aware there are many requirements for the exemption, such as the home must have been your primary residence for 2 out of the last 5 years.