Are you getting all your homeownership tax breaks?
Any article like this one needs to start off with a warning. This is where I inform you that I am not an accountant or in any other way a tax expert. Furthermore, as part of this full disclosure, you should also know that on occasion (more often than I choose to admit) I find myself counting on my hands. I was also nearly brought to tears out of total confusion when my son was learning this new math thing.
Having said all that, I am a homeowner. The five deductions listed here are common place. Still, we heavily advice that you check with an expert before filing.
1. The Mortgage Interest Deduction
When you pay off your mortgage a portion of each monthly payment you make goes toward your loan’s principal, while a portion goes toward interest. It’s the interest portion you’re eligible to deduct on your taxes.
You don’t have to worry about figuring out which portion of your monthly payments apply to mortgage interest versus principal. Your lending company should have sent you a form summarizing that information.
2. Property Tax Deduction
You can deduct up to $10,000 in property taxes each year. This can get tricky because this deduction includes state and local taxes.
3. The home office deduction
If you’re self-employed, or have been working remotely, you may be eligible to take a deduction for maintaining a home office. The most common way to do this is to figure out your total household expenses, from utilities to internet fees, and then take a deduction based on the percentage of your home your office takes up.
4. Mortgage points
This applies only to those who bought a home in the past year. Sometimes people pay discount points to secure a lower interest rate for their mortgage. If you paid points when your mortgage closed, you may be eligible to deduct them on your tax return.
5. Home equity loan or HELOC interest
Home equity loans let you borrow against the value of your property. You can use those funds anyway you choose. However, if you took out a loan in order to improve your home, renovations or any repairs, then you’re allowed to deduct the interest you paid on the loan. If you used that money for something outside of home improvements, that deduction won’t apply.