7 Tax Tips for Homeowners
Benjamin Franklin famously said, “In this world, nothing can be said to be certain except death and taxes.” This oft-quoted remark is still true today. And that’s exactly why you need tax tips. The federal government offers tons of tax breaks to homeowners, so you can save thousands off your taxes by taking advantage of these breaks.
Just as you visit your doctor to increase your personal health, visit Zack Adam of GoPrime Mortgage, Inc. . (dba PrimeRate Mortgage Lending, Inc.) to find a way to increase your personal wealth. As always, seek professional tax advice from a trusted CPA. Contact Zack for a referral, if you need one.
Income Tax Deductions
In 2014, there was an estimated $126 billion in tax benefits claimed by homeowners and an estimated $139.8 billion that will be claimed for the 2016 fiscal year. That is an exorbitant pie that every homeowner should grab a piece of. These deductions include:
- Mortgage interest deduction
- State and local property tax deduction
- Capital gains exclusion
- Mortgage revenue bonds
In 2012, the average homeowner saved about $1,906 in taxes, compared to renters with similar incomes, depending on the state they live in. The tax benefits of being a homeowner are obvious. So listed here are seven tax tips to make owning real estate work for you:
1. Tax Tips for First-Time Buyers
The IRS loves first-time homebuyers. If you’re a first-time homebuyer, you can save when you buy and when you renovate. You’re eligible to withdraw up to $10,000 from your traditional IRA, penalty-free, to put towards the purchase of your home. Your family members can contribute to your home purchase too — penalty-free — from their IRA. You pay no taxes on these gifts, but make sure you follow the rules.
You can use these withdrawals and gifts to improve your first home. This is tax-free money you can use to improve your home, but you have to use the money within 120 days of its withdrawal. Be sure to familiarize yourself with all the stipulations. Talk to Zack at 828-348-1907 to get a referral to the best certified public accountant who can share tax tips to make you a savvy first-time homebuyer.
2. Private Mortgage Insurance
If you’re paying private mortgage insurance (PMI), you can use your payments as a deduction. There are varying factors that determine how big this deduction can be. It depends on such things as whether you made more than $100,000 in 2016 or if you’re married and filing separately. As a PMI customer, you should heed these tax tips. Find a knowledgeable tax accountant or an independent mortgage lender about the implications of filing your taxes separately or together.
Taxes can be a messy business. A tax accountant that you see once a year may not know what tax tips to offer. PMI is a tax deduction put in place after the housing bubble in 2008. It was due to expire in 2014, but the government has seen the benefit in it and has extended it to include the 2016 tax year.
3. Mortgage Deductions
As a homeowner, you may be eligible for deducting the mortgage interest of your home. There are some factors that allow you to take the deduction in one year — all at once — or over the life of your loan. To be able to take the deduction all at once, you have to meet a series of criteria.
Many first-time homebuyers are able to take the deductions in the same year. If you’re buying a second home, you probably have to spread these points throughout the life of the loan. Either way, this is a tax benefit you don’t want to miss.
4. Home Improvement Deductions
You can save more on your 2016 tax deductions if you made any home improvements that required you to take out a loan. This is a better option if it’s your first home versus your second home. But ask for resources for tax tips from your trusted mortgage lender, like Zack Adam.
You’ll have the chance to deduct on home improvement loans as long as they aren’t more than $100,000 or more than the value of the entire property. This is a great option for you save money on your taxes either this year if improvements have been made or next year if you’re considering making future improvements.
5. Property Tax Deductions
Your property tax is usually a deduction that all homeowners should be taking. Still, every year, only about half of homeowners take advantage of this deduction. Make sure you’re in the smart half.
This is a tax deduction every homeowner should be sure to look into when filing tax returns. As a homeowner, you have a number of tax tips available to you, don’t overlook this common one.
6. Renewable Energy Tax Credit
This is an excellent tax credit to take advantage of if you’ve installed renewable energy sources in your house. You may have installed these units to save on utility bills over your home’s lifetime or to contribute to reducing your carbon footprint, but you also have the chance to save on your taxes.
This is called the Renewable Energy Efficiency Property Credit and could be as high as 30 percent off the total cost of installing the energy source. This is a great way to reduce your 2016 taxes and to do your part to protect the environment.
7. Energy Efficient Tax Credit
There may be tax credits available to you if you installed or made any changes in your home to make it more energy efficient last year, such as:
- Approved appliances
- Storm doors
- Heating or cooling units
The tax credit for these changes currently is up to $500 for the 2016 fiscal year. Simply by providing a receipt in your tax returns, you can save on your taxes. This is one of those easy tax tips that puts money back in your pocket.
Owning a home offers a number of ways to save money on your tax returns. For more information, refer to the IRS’ Publication 530: Tax Information for Homeowners. While this document reflects the changes of fiscal year 2015, the IRS should update it shortly for the new year.