So… you own a home and now it’s time to complete your tax return. While you may be preparing your W-2’s and getting your investments in order, don’t forget about the special tax savings and tax deductions for home owners. Use this simple list to help you prepare for your visit with your tax professional. Be sure to ask if you are unsure if a deduction applies to you.
Mortgage Interest
This is the one of the best deductions you will take each year as a home owner! You can deduct up to $1.1M in interest for loans secured by the property, used to buy, build or improve a first or second home.
Real Estate Taxes
This is another one of those deductions you get to take each year. In most cases, you are allowed to deduct state and local taxes paid during the year on any number of personal residences.
PMI
For 2014, if you paid PMI, it is deductible on your itemized tax return.
Mortgage Points
Mortgage points are tax deductible in the year the points were paid, regardless of if you actually paid them or if the home seller paid them for you. Be careful – mortgage points on refinances are deducted over time versus a lump sum as a first mortgage is.
Home Office Deduction
This is one of the most common tax deductions for home owners that work from home or own a business; however, it is one of the most often mis-deducted item. To qualify for the home office tax deduction, the space you are deducting must be used exclusively for home office purposes – either where you meet with clients regularly or your principle place of business. Typically, you are allowed to deduct a share (pursuant to the square footage) of the depreciation, insurance and utilities. To avoid a tax mishap, be sure to clear this deduction with your tax professional.
Energy Efficiency Deductions
If you made home improvements to your primary or secondary residence that are an approved energy efficiency improvement, you are entitled to deduct a portion or full amount from your taxes. Consult your tax professional to learn the approved improvements and deduction amounts for 2014.
Loan Prepayment Penalty
Paid off your home loan in 2014 and was charged a prepayment penalty on your loan? The amount of the penalty is typically tax deductible as mortgage interest.
Consult your tax professional prior to taking any of these or other deductions to ensure you are legally fully allowed to claim these on your tax return.