Homeowners deserve every financial break they can get their hands on amid today’s trying economic times. After all, the average mortgage borrower pays out a hefty percentage of their income on housing expenses and loan payments that include large amounts of interest. That’s why the mortgage interest deduction and other tax breaks can help homeowners get back a sizable chunk of cash. Saving money smartly by recouping housing expenses is a great way to ensure continued, stable and enjoyable home ownership.
Deduct Your Mortgage Interest
The mortgage interest deduction is today’s most popular tax break and is routinely used by millions of mortgage borrowers every year, though it has become a less effective saving tool due to today’s ultra-low mortgage rates.
Most homeowners qualify for interest deductions, even if they hold a second mortgage. Under current mortgage interest deduction rules, all interest paid each year may be deducted from the borrower’s income, provided that the original loan amount is less than $1,000,000 for an individual or $500,000 if married filing separately on their tax return. This mortgage interest deduction
Certain types of loan programs are subject to additional restrictions and limitations including HELOCs and home equity loans. Under today’s rules, interest on home equity loans may be deducted up to $100,000 total debt throughout the year.
Mortgage points have also been used as an eligible tax deduction claimed by home buyers, even if they were paid by the property seller (provided the transaction meets certain requirements). Mortgage points collected in refinance transactions are not tax deductible under most circumstances.
Choose Profitable Home Improvement Projects
Tax breaks are available for homeowners that make certain energy saving and environmentally conscious changes to their homes. For example, the installation of solar panels, certain metal roofs, insulated windows and siding or the purchase of energy efficient appliances are considered as green, energy saving home choices that generally a tax break for the homeowner.
Home improvement projects like room additions or interior design changes may not be used a tax deduction if they’re not completed in accordance with specific, “green” environmental guidelines.
Home improvements can also be deducted as medical expenses if the upgrades are for a reasonable medical purpose. The only catch is that if the cost of additions are claimed as medical expenses, they aren’t allowed to increase the homes value. Acceptable projects include wheelchair ramps, lowering cabinets and adding handrails.
A tax professional can point out which tax deductions or even tax credits will make your home improvement project profitable.
Use Home Office Tax Breaks
Working from a home office has many benefits, including the home office tax deduction. Homeowners that work from home may ultimately qualify for money saving tax breaks, even they’re only working part time from home. Some home businesses are larger than others, creating various types and levels of taxable deductions for home office deductions.
The IRS currently provides two options for homeowners to claims the home office tax credit: The Regular Method or Simplified Method. Under the regular method, the actual expenses must be fully documented. Under the Simplified Method, the expenses may be deducted at $5 dollars for each square foot of the home used for business purposes, up to 300 feet.
An experienced tax professional can thoroughly explain your options for deductions related to working from home.
Deduct Your Property Taxes
The homeowner carrying the deed to his or her home and property may qualify for deductions related to the property taxes they paid during the calendar year. While it might seem odd filing a deduction for a tax refund using paid taxes, many homeowners can legally save money doing so.
This particular deduction was created to avert income tax spending on property taxes and is a welcomed advantage every homeowner can enjoy every year during tax season. The money saved for a property tax deduction can even be used for home improvement projects that can increase property values, possibly triggering additional tax deductions.
Keep Immaculate Records
Maintaining a record keeping system for all the money spent on a home and property is important to make sure all available deductions are included when filing taxes. If not, homeowners often lose track of how much money is spent on a particular home project or paperwork for interest rates paid in are missing.
Investing in an organized filing system can also help tremendously and have great benefits during tax season, especially for homeowners planning to file itemized tax forms. Using on a personal financial software solution like Quicken or Quickbooks Pro can keep track of everything for you, help analyze your benefits in real time and file your returns for you. Other tax software like TurboTax or TaxAct also work great during tax season if you still like keeping records the old-fashioned way.
Help Relieve The Stress Of Moving
Moving to a new home can be both stressful and expensive. In some cases moving costs are extremely expensive, especially if the new home is a long distance away. Tax deductions are available for moving expenses if the homeowners new job is more than fifty miles from their present residence. Expenses that can be claimed as a deduction include those used for accommodation and travel during the move, as well as the move itself. Moving expense tax deduction can be claimed without filing an itemized form.
Learning how to take advantage of tax deduction for homeowners can help you save a great deal money. Some of the deductions like money spent on interest and home improvements can even be returned to you through a tax refund. These tax breaks provide relief that every homeowner can appreciate in the economic times of today.
