Owning a home is the American dream. Little girls have the white picket fence and two story colonial dream all their lives and little boys grow up knowing one day they will provide one to their own families. It is a part of American life and with it comes it own set of advantages and disadvantages. Fortunately, there are a few great tax breaks for homeowners.
Taking itemized deductions are on the top of the saving list for homeowners. It is time consuming, tedious work but work that can pay off greatly each year. One of the biggest deductions you will have is the payments made each month toward ownership of your home. Most of any homeowner’s mortgage payment is interest which is totally deductable. One stipulation there is if your mortgage is over one million dollars. If so, the Internal Revenue Service will heavily limit your deductions. Property taxes are another huge tax break for homeowners. Usually, on payment of a homeowners loan the monthly payments accrue in an escrow account for a yearly payment. This tax property payment can be used as an itemized deduction on your taxes each year as a homeowner. Unless you became a homeowner on January 1rst you did not pay taxes on the house the whole year. Check your contract when you purchased the home for the exact date. Every penny you paid in interest and taxes is deductable. . Don’t count out the standardized deduction route, however. There are times when the standard deduction amount would be less or more than the itemized deduction route.
Energy efficiency is another way for homeowners to get tax breaks. If you install windows, skylights and doors that are energy efficient and are in agreement with Energystar requirements you can receive a hefty tax break. Most often the break comes in the form of 10% refund on cost of products. Installation costs do not count and windows are capped at $200, doors at $500. There are several other green energy tactics to lower your tax bill. There are programs for thermostats, dishwasher and appliances and a whole slew of other ideas. A tax professional will be able to tell you all you can claim as a homeowner in the green area.
Points are another great homeowner’s tax break. If you paid any points or the seller paid any for you when the home was purchased you can deduct them at tax time. A point is kind of like prepaid interest. When you obtain a mortgage to purchase the house most lenders will require that you buy a specific amount of points. You may also choose to pay for even more points during the year. If so, depending on when you bought them, you may be able to use them as a tax break. Some mortgage contracts state that you cannot use the points you’ve purchased until a specified amount of time has passed. It is extremly important to take excellent records and keep detailed results of every meeting during the process of becoming a homeowner. It makes filing yealry income taxes so much easier and stress free.