Whether you are a first-time buyer, a long-time homeowner who refinanced, or a seller, there are a many important deductions available to you.
The easiest way for a family to get more than just the standard deduction is to claim tax breaks related to a house. Charitable deductions or a smattering of health care costs might not add up to the $5,950 standard deduction for individuals or the $11,900 mark for married couples. But a few of these big-time deductions can push you over the top and result in a much bigger return.
The downside is no more simple tax returns, since you’ll have to itemize. But the money you’ll get back makes it all worthwhile.
Here are seven important tax tips for homeowners to ease the process:
• Mortgage interest is your best friend: If you just bought a home or refinanced in the last few years, the savings can be significant, since more than half your monthly payment goes towards interest. For more information: Tax Information for Homeowners
Home Mortgage Interest Deduction
• Mortgage insurance is deductible: That’s a big benefit for lower-income homeowners who often can’t afford a big down payment and must pay private mortgage insurance until they have at least 20% equity in their homes.
• Taxes are tax deductible: It sounds odd and is frequently overlooked, but homeowners can deduct their local and state property taxes on federal tax returns. There also may be special property tax benefits for lower-income homeowners based on your state or city of residence, so look into further breaks specific to your community.
• Qualified renovations count: Fixing a leaky faucet or putting crown molding in the living room is not tax deductible. But there are a number of items in the tax code that allow for tax breaks and credits. Several items covered under residential energy efficiency can provide tax relief, including new solar panels or certain hot water heaters. There are also deductions that can be made for home office improvements, as well as for medically necessary changes, such as an entry ramp or a handicap-accessible bathtub.
• Unqualified renovations can count later: While that new addition might not be “necessary,” the expense could be an important tax deduction when you sell. The IRS allows you only $250,000 of profit when you sell a primary residence, but you can deduct any renovations that boosted your home’s value from any total profit to get under that threshold. Find those receipts if you’re sitting on a big profit and planning to sell.
• Claim selling costs: If you sold a home in the past year, costs including title insurance, advertising and real estate broker fees can also be claimed on your return. You can claim certain repairs to reduce your capital gains on the sale, presuming they were made within 90 days of the sale and clearly for the intent of marketing the property. For more information: Selling your home
• Don’t forget moving expenses: If you bought a home in 2012, there’s a chance that you did so because of a job-related move. If this is the case, you may be able to deduct some expenses, provided you have the receipts. You must have moved 50 miles or more, and the reasons for your move can’t be personal. For more information: Moving Expenses