It’s tax season. Here are some tax breaks homeowners should investigate to maximize their refund.
- Mortgage interest
- Mortgage insurance premiums & debt forgiveness
- Energy-related tax deductions
- Capital gains exclusion
- Inheritance of property
- Real Estate property taxes
- Home office expenses
- Moving expenses
Check the following site for your tax questions: https://www.hrblock.com/get-answers/ and https://www.irs.gov/ and http://www.msn.com/en-us/money/taxes/8-tax-breaks-most-homeowners-dont-realize-they-can-get/
Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. You can deduct home mortgage interest if all the following conditions are met.
- You file Form 1040 and itemize deductions on Schedule A (Form 1040).
- The mortgage is a secured debt on a qualified home in which you have an ownership interest.
- In most cases, you can deduct all of your home mortgage interest. How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds.
Mortgage Insurance Premiums
Mortgage insurance is an insurance policy where your mortgage lender is protected against the value of the outstanding mortgage liability in the event that you die or are disabled, and are unable to make mortgage payments.
Mortgage insurance premiums deduction is only available if all of these are true:
- You paid or accrued it on a mortgage insurance contract issued after Dec. 31, 2011 and before Jan. 1, 2017.
- It’s acquisition debt for a qualified residence (new mortgage).
- You itemize your deductions.
However, even if you meet the criteria above, the mortgage insurance deduction will be:
- Reduced by 10% for each $1,000 your adjusted gross income (AGI) is more than one of these: $100,000 or $50,000 if married filing separately
- Eliminated if your AGI is more than one of these: $109,000 or $54,500 if married filing separately
Energy-Efficient Tax credits
The energy efficiency tax credit helps to offset the cost upgrading your home to make it more energy efficient. Using the energy tax credits, you can claim the cost of more energy efficient items you install in your main home to increase your home’s heating and cooling efficiency. You should expect these items to remain in use for at least five years.
Capital Gains Exclusion
If you’ve owned and lived in your principal residence for at least two of the last five years, then the exclusion for gain on its sale remains available. The exclusion is up to $250,000 of gain for a single taxpayer and up to $500,000 of gain for joint filers if you satisfy the use and ownership tests.
Inheritance of Cash or Property
If you inherited cash payable to you in a check, it’s usually not taxable. Whether an inherited item is taxable will depend on the type of item you inherited. When you inherit an asset, the cost basis of the asset is “stepped up to value” on the date of death, which helps you avoid capital gains taxes on that property. Here’s how it works: Let’s say your grandfather just died, leaving a home to you and your siblings. The home is valued at $500,000 at the time of your grandfather’s death, but the original price paid for the home, the basis, when he bought it 30 years ago was $100,000. While you and your siblings may have to pay estate or inheritance taxes depending on the size of the estate, you won’t have to pay capital gains taxes on $400,000 in gains on the house.
“Stepped-up basis on death remains available for a principal residence, as well as other taxpayer assets on death,” Luscombe said. “However, with discussions about eliminating the estate tax and shifting to carryover basis, it is not clear how much longer current law will remain in effect. Stepped-up basis means that the inheritor of the residence who then sells the residence would likely have minimal taxable gain because their basis would be stepped-up to the date of death value of the residence.”
Real Estate Property Taxes
You can deduct the real estate taxes you pay on property in the year you pay them.
Home Office Expenses
If you use part of your home for business operations, you may be able to deduct some of your business expenses. The home office deduction is available for homeowners and renters, and applies to all types of homes, according to the Internal Revenue Service, which provides details and a full explanation of the requirements to claim this deduction on its website.
If you moved because you changed jobs or your business relocated, or if you started a new job or business, you may be eligible to deduct your moving expenses. The IRS explains that you must meet the following criteria in order to qualify.
- Your move closely relates to the start of work
- You meet the distance test
- You meet the time test