It’s a new year and that means only one thing – tax adjustments from the IRS. Okay, not exactly what you had in mind, but there are some great tax breaks available to homeowners. Everyone’s situation is different, and it is always a good idea to talk with your financial advisor, but here’s a look at some of the potential tax benefits you can consider. And you can thank your home later.
Mortgage Interest – That’s right! In most cases, you can deduct every penny of interest paid on your home loan.
Late Payment Charges – What? Slackers do get rewarded. You may be able to deduct a late payment charge as home mortgage interest.
Prepayment Penalties – And for those of you who are not slackers, well you get a tax break too. If you pay off your home mortgage early and are required to pay a prepayment penalty, you can deduct it as home mortgage interest.
Points – For those of us who paid for points in order to secure a better interest rate, this expense may be deductible in the year you paid them. Other terms for points are: loan origination fees, maximum loan charges, loan discount, and discount points.
Real Estate Taxes – Most can deduct annual taxes paid based on the assessed value of your property.
Home Improvements – Keep those receipts! You can’t deduct the expenses now, but when you sell your home the cost of the improvements can be added to the purchase price to help reduce taxable gain that may accrue from the sale of your home.
Mortgage Debt Forgiveness – If you sold your home as a short sale in 2014, Congress has extended the tax relief originally passed in 2007, so you won’t have to show any mortgage debt forgiveness as income.
Beginning in 2014, Mortgage Insurance Premiums (also known as PMI) are no longer deductible. If you desire a reduced or no cost utility bill, there are also great energy efficient benefits available that are set to be phased out as early as 2016.