2017 Homeowner Tax Deductions To Keep In Mind

homeowner tax deductions March 2, 2017 1:06 am
As I began preparing my taxes for the big April 15th IRS deadline, I was reminded of how lucky I am to be able to write off my mortgage interest and property taxes as a homeowner. I was also thinking about my clients, and I wanted to make sure that you are taking advantage of any and all tax benefits of homeownership too!

I’m no tax accountant, so please be sure to speak with one before using these deductions or credits, but here are the nine most common for those that bought, sold, or simply lived in their own home during 2016.

1. Mortgage Interest Homeowner Tax Deductions

One of the most common homeowner tax deductions is mortgage interest. If you are paying interest on a mortgage, then you will likely be able to deduct that interest on up to $1 million dollars in loan value on your first and/or second home. There are exceptions to this especially when it comes to rental properties, so for more information, read IRS Publication 936, which will also explain other mortgage interest such as equity loan, home improvement loan, and points.

Needed: Form 1098 Mortgage Interest Statement from your lender.

2. Equity Loan Interest Homeowner Tax Deductions

If you have a home equity loan (HELOC), you may be able to deduct some of the interest. If your tax professional says you are entitled to this deduction, it is usually limited to the smaller of $100,000 or the total of your home’s value minus the outstanding debt.

Needed: Form 1098 Mortgage Interest Statement from your lender.

3. Home Improvement Loan Interest Tax Deductions

As with a home equity loan, the interest from a home improvement loan can be deductible up to $100,000. The IRS stipulates, however, that the loan must be for capital improvements and not simple repairs. The broad definition of a capital improvement is something that will make your home value increase or change the way you can use your home. Some typical capital improvements include:

  • Roof
  • Fence
  • Garage
  • Deck
  • Porch
  • Swimming Pool
  • Built In Appliances
  • Insulation
  • Heating
  • Cooling
  • Landscaping

Needed: Receipts for each home improvement.

4. Points From a Home Purchase

If you purchased or refinanced your home in 2016, you may be able to write off the points from that loan during this tax season, as long as it was your primary home. For second homes, the points will be spread out over the life of the loan.

Needed: Form 1098 Mortgage Interest Statement from your lender.

5. Property Taxes Can Be a Homeowner Tax Deduction

As a homeowner on The Westside, you will pay state and local taxes. In most cases, these taxes are deductible. Some people pay their taxes as part of their monthly mortgage payment. The property tax amount is kept in an escrow fund until the tax due date. Others pay their taxes directly to the city and state. To read more about property tax deductions, read IRS Form 530.

Needed:

  • Form 1098 Mortgage Interest Statement if you pay your taxes through an escrow fund.
  • HUD-1 settlement statement if you bought a home this year to determine if you paid any taxes when you purchased your home.
  • Tax receipt if you paid your taxes directly to a government entity

6. Energy Efficiency Tax Credit

The government provides a tax credit for those that made their homes more energy efficient. This includes the addition of storm doors and windows, efficient heating and cooling systems, as well as insulation. The credit is:

  • 10% of the improvement up to $500
  • $200 for energy efficient windows

This credit expired on December 31, 2016.

To learn more about this tax credit, read the program information here: https://energy.gov/savings/residential-energy-efficiency-tax-credit

Needed: Receipts for energy efficient improvements

7. Renewable Energy Tax Credit

As with the energy efficient tax credit, this credit also expired on December 31, 2016. If you added renewable sources of energy to your home such as solar or wind power, you can get a credit up to 30% of the price of equipment and installation.

For full program information, click here: https://energy.gov/savings/residential-renewable-energy-tax-credit

Needed: Receipts for renewable energy additions

8. Home Office Tax Deductions

For my clients that have a home office, you may be able to deduct costs related to that portion of your home. In order to take this deduction, the office must be used exclusively as your place of business or as the storage for samples and inventory. To learn more about home office deductions, read IRS Publication 587.

Needed:

  • Square footage of your home
  • Square footage of your office space
  • Receipts for office expenditures related to the upkeep of the office space

9. Selling Costs Associated With Tax Deductions

If you sold your home during 2016, you may be able to deduct costs associated with the selling of your home. Costs can include things such as:

  • Broker’s Fees
  • Title Insurance
  • Legal Fees
  • Advertising
  • Escrow Fees
  • Inspection Fees
  • Repair costs made within 90 days of the sale made to improve the marketability of the home

For those that plan to sell in 2017, be sure to keep accurate records of these costs. IRS Publication 523 will help you understand what can and cannot be deducted.

Needed:

  • Form 1099-S for real estate tax deductions
  • HUD-1 Settlement statement if you haven’t already deducted all your points from the purchase of your home
  • Receipts showing fees and repairs

Although the April 15th deadline is just around the corner, you may be able to take advantage of these homeowner tax deductions and credits. Those listed are just a representation of potential deductions and credits, and I highly recommend that each of my clients work with a trusted tax adviser to take advantage of the tax deductions associated with their individual circumstances.

(**NOTE: I am not a tax expert and this post is for general information only. Talk with a tax professional to receive tax advice.)

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