2017 Home Ownership Tax Breaks
Taking care of your taxes can be a dreaded time of the year for most people as they worry whether they are going to owe money or not. As a homeowner there are some deductions that you can use to help reduce that stress and potentially increase your return or reduce the amount you owe. With the help of Intuit TurboTax and the IRS, we will list out some of the well-known deductions in addition to some of those less common deductions available to homeowners. For specific questions, details about a deduction/credit or questions regarding eligibility please contact a local CPA or visit TurboTax and the IRS websites.
Do You Have Two Residences?
What You Can Deduct:
- Property Taxes: you can also include any property taxes that you reimbursed to the seller that they had prepaid if you purchased a home during the year you are filing taxes for. If you were in the home the entire year you can deduct that entire year of taxes. This amount can be found on your local county assessor site or on some mortgage statements if there is an escrow.
- Mortgage Interest: this includes your primary residence and for some, a secondary residence. To find this amount paid you will need to view your 1098 sent by your mortgage lender.
- Home Equity Loan or Line of Credit: interest can be deducted on loans up to $100,000 despite what the loan is for.
- Points: any points paid on a newly purchased home during that tax year. Points can also be called Loan Origination Fees, Maximum Loan Charges, Loan Discount or Discount Points.
- Improvements: home improvements directly related to medical care can be deducted in addition to Energy Improvements including: solar panels, solar-powered water heaters, wind turbines (must meet specific sizes), geothermal heat pumps and fuel cells relying on renewable energy to generate power for the home.
- Moving Expenses: if you moved due to a change in job or location and meet the time, distance and moving relative to start date tests you can be eligible. It also applies to military members moving due to permanent change of station and they are also not required to meet the 3 primary tests.
- Mortgage Insurance Premiums: for those who have loans that they paid less than 20% down they most likely have to pay a monthly mortgage insurance premium. This can be written off for those with loans issued in 2007 or later and meet specific income requirements. *This could potentially be the last year for this deduction.
**If you use your home for business or have a home office you may qualify for additional credits and deductions. To see the entire list please visit the IRS website.**
Home Office Deductions
What You Can’t Deduct:
- Homeowner’s association dues: these are often paid in newer subdivisions or condominium's for common area maintenance in addition to other items.
- Home insurance: your insurance premium is not deductible however if you have a home office you may be eligible to write off a portion based off square footage of the office space. See the IRS or TurboTax website for further details.
- Home appraisal fees: often occur when purchasing a home with a mortgage or when refinancing a mortgage.
- Regular home improvement expenses: general improvement expenses are not an item that you can deduct each year (unless related to medical care as mentioned above) but you should keep those receipts for when you go to sell your home!
- Utilities: you are unable to deduct your payments made to local utility companies for items such as water, sewer, gas, electric, etc. however, you can deduct a portion similar to home insurance if you have a home office.
- Mortgage principals: you are able to deduct the interest portion but not the actual principal payment made monthly for your mortgage.
Home Expense Deductions
What is a Capital Gain?
In addition to understanding the general deductions and credits as a homeowner it is important to understand what capital gains are and how it can affect you during tax preparation. Capital gains is the money/difference when you sell something for more than you paid for it originally. This is very common in sales of homes especially with the housing market Omaha has been experiencing the past couple of years. If there is a capital gain in the sale of your home you can deduct up to $250,000 if you are a single filer or up to $500,000 if you are married filing jointly. However, according to the IRS, you qualify if you have owned and used the home as a primary residence for 2 out of the past 5 years. For additional rules and exceptions please visit the IRS website.