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Common Tax Deductions for Homeowners

As a homeowner, building equity is just one of the benefits of owning a home. There are also many tax benefits to being a homeowner that helps taxpayers reduce their taxable income. If you like gathering all your tax documents to file as early as possible, this list of common tax deductions for homeowners will help ensure you have everything you need before you file your taxes this year. Check with your trusted tax advisor to ensure all of these apply to you!

Interest Rates-Mortgages

Mortgage Interest

The mortgage interest deduction is one of the largest tax breaks available to homeowners because, for most homeowners, a significant amount of the monthly payment goes toward interest. All interest paid on your home loan each month, including any interim interest paid at closing if you purchased a home in the previous year, is deductible. The rule also applies if you own a second home. 

You can find any interim interest totals on your Closing Disclosure received at settlement when you closed on your home. You should also receive a Form 1098 from your lender in January that shows your total interest paid for the previous year. 

Points

Did you pay points to secure a lower interest rate? You’re in luck because you can claim the amount paid toward points as a deduction in the first tax year after your home purchase. 

Private Mortgage Insurance (PMI)

If your home loan required PMI, you may be eligible for a tax deduction on the amount. You should check with a trusted accountant or tax professional about Private Mortgage Insurance deductions, as whether it’s deductible depends upon your income. 

Moving in Southwest VA or Northeast TN

Moving Expenses

While not everyone is eligible to claim the moving expenses tax deduction, it is worth checking if you moved for a new job or transferred to a new location for your existing job. If you’re eligible for the deduction, you may be able to claim mileage and hotel expenses. Talk to a tax professional to help you determine if you can claim a moving expense deduction.  

Other Deductions

Homeowners may qualify for several other deductions, but you should check with your accountant or tax professional to advise you on your eligibility. Some of these tax deductions include:

  • Home office deductions 
  • Energy efficiency credits
  • Property taxes
  • Medically necessary home improvements

Home Expenses that are Not Deductible 

When you start exploring the deductible expenses available as a homeowner, you may think about further expanding your deductions to include other home expenses. However, you should be aware that the following home expenses homeowners can’t deduct. 

  • Down payment
  • Utility costs
  • Costs for refinancing a mortgage
  • Depreciation
  • Homeowner association fees
  • Home insurance premiums
  • Domestic help wages
  • Transfer taxes

If you’re ready to take advantage of homeowner tax deductions by purchasing a home in the coming year, contact us. Our real estate professionals are happy to help with your home-buying journey. 

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