You can’t avoid paying taxes, and we all need to pay our fair share. However, paying your fair share shouldn’t place an unjust burden on you. As a homeowner, your tax burden is doubled because you pay both income and property taxes. To decrease that burden and boost your tax savings, take advantage of these homeowner tax deductions. As a result, you can use your tax savings to go on a vacation, increase your child’s college fund, build upon your retirement fund, or complete another home improvement project.
Home Improvement Tax Deduction
You spend so much of your time at home, and you try to make it as comfortable a place to live as possible. If your home needs some upgrades, consider improvements that will help foot the bill for themselves.
You can get an energy-efficient tax credit of up to $500 for installing storm doors and energy-efficient insulation and air-conditioning and heating systems. Switching out your old windows for energy-efficient ones could earn you $200. This credit expires this year on December 31st. So, this year will be your last chance to take advantage of getting tax credit for making your home more energy efficient.
Also, installing equipment that uses renewable sources of energy makes you eligible for the Renewable Energy Efficiency Property Credit. The credit covers 30 percent of the cost of equipment and installation. This credit also expires this year on December 31st.
Mortgage Interest and Refinancing
If your mortgage payment makes you cringe each month, you’ll be glad to know you can deduct taxes on the following:
* Interest towards mortgage
* Mortgage payments for additional property
* Rental properties
* Refinancing and home equity lines of credit (HELOC) up to $100,000 of debt.
If you own multiple properties, the mortgage interest on additional property is deductible as well. The cool thing is that it doesn’t have to be a house. It can be a boat or RV; as long as it has cooking, sleeping, and bathroom facilities, it counts as additional property.
Regarding using your second home as a rental, you need to vacation at least 14 days at the property or spend more than 10 percent of the number of days you rent it out.
Furthermore, you can claim points on your mortgage the year you paid them if the following happened:
* The loan was to purchase or build your main home
* Payment of points is an established business practice in your area and the points were within the usual range
Now, this is the big one. Property taxes you pay each year are tax deductible. The amount of property taxes you paid for the year shows up on your lender’s annual statement. You must deduct them as an itemized expense on your Schedule A tax form.
First-time homebuyers, look at your settlement sheet to see additional tax payment data. You may deduct the portion of property taxes you paid during the first year of your homeownership.
Come back next week for a look at how to protest your assessment to lower your taxes!