Tax Breaks for Homeowners? Tax Breaks for Homeowners?

Tax Breaks for Homeowners?

Friday, September 15, 2017

If you own a home and are looking to save on your taxes, or if you’re considering buying a home in 2017 and trying to see if you can afford it, here are five valuable deductions that you may be able to claim if you’re a homeowner:

Mortgage Interest

The interest paid on a home loan is typically the largest potential deduction for most middle-class Americans. For instance, a 30-year mortgage on a $300,000 at current rates will cost you more than $12,000 in interest payments your first year. If you happen to own a second home, too, you can also deduct the mortgage interest on that, as long as it’s not a rental property.

Points

If you recently purchased a home but paid “points” to the bank in order to get a better rate, that expense could be tax deductible in the year you paid them. A point is typically 1% of your loan amount so, on that $300,000 home, you would receive a $3,000 tax break for paying down one point. Points on refinance loans and home equity loans are also deductible, but must be spread over the life of the loan instead of all in one year’s return.

Energy credits

If you invest money to improve the energy efficiency of your home, you may qualify for a tax credit. A tax credit can be more impactful than a deduction, because they are dollar-for-dollar credit against the taxes you owe. For instance, if you’re in the 28% tax bracket, then a $1,000 deduction lowers your tax bill only $280, while a credit lowers your tax bill by $1,000 regardless of your effective tax rate. There are limits on energy credits depending on what you purchased, but the dollar-for-dollar savings can make them valuable.

Property taxes

Property taxes owed on your primary residence may deductible as well, and can add up quickly depending on where you live. Deducting a large local tax bill can save you a significant amount on your federal return.

Casualty losses

If you suffered property damage and weren’t reimbursed by an insurance company for repairs, you may be eligible for a deduction. Whether it’s flooding or a fallen tree, damage to your home can cost you thousands of dollars. Your casualty losses must exceed 10% of your adjusted gross income (i.e. not small repairs), but if so, you may be able to deduct this expense.

This information is not to be construed as tax or legal advice. For additional information, please visit source material at http://www.bankrate.com/finance/taxes/home-sweet-homeowner-tax-breaks-1.aspx

 
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