With tax season right around the corner, if you purchased a home in the last year, there may be some extra tax deductions that you qualify as a homeowner that could lower your income tax amount as your file your annual income taxes.
Unfortunately a downpayment is not tax deductible. However, you may be able to deduct the following 4 items.
1. Mortgage Loan Interest, Points, and Mortgage Insurance
The biggest real estate tax deduction currently on the books allows you to deduct 100% of the mortgage interest you paid during the tax year. Your mortgage lender should provide you with a Form 1098 that will report how much interest you paid. It will also report money spend on points to buy down your interest rate. Lastly, if you were required to pay mortgage insurance on your FHA or VA loan, or if you had a conventional loan you were required to pay mortgage insurance on, you may be able to deduct it as well. Your tax accountant or programs like Turbo Tax should guide you through these possible tax deductions.
2. Property Taxes
Another potential deduction is the money you spent on property taxes. For many who purchased in the last year, your portion was likely on the Settlement Sheet from your closing. (Sometimes referred to as a HUD-1 or ALTA form). In subsequent years, your property taxes might be paid to your local municipality by your lender through the escrow account they have set up for you. If so, they might include the amount of property tax paid on the Form 1098 mentioned above. But your municipality should also have provided you info on how much your property taxes were for the year.
3. Some Moving Expenses
Moving expenses might be tax deductible if your move is closely related to the start of a new job. As a rule of thumb if you moved more than 50 miles to be closer to your new workplace, you might be eligible. Consult your tax pro or the IRS for details on this particular credit and be sure you have moving receipts.
4. Energy Efficient Home Improvements
As part of the Energy Tax Credit, if you made qualifying energy efficient upgrades to your house, you might be able to claim tax credits. Each year the items that qualify change, but it could include new windows, new insulation, solar power, or other energy savers. Consult the most recent energy publications at www.irs.gov to see if your improvements qualify.
Here’s a video I put together that I send out to all my clients who have purchased a home in the last year to help remind them not to leave money on the table.
If you have any questions, please don’t hesitate to contact me.
As a sidenote, the information in this blog and video are provided for informational purposes only and are not intended as legal, accounting, or tax advice. Nothing in this blog is intended to substitute for advice from an attorney or tax accountant.