Tax season is quickly approaching, and whether you’re a first-time homeowner or have owned your home for years, there are many deductions and tips you should be aware of. Here are six important tax tips for homeowners to help you get the most out of your refund.
Claiming mortgage interest is one of the most common deductions. On average, taxpayers get $100 billion annually in mortgage interest breaks. Mortgage interest is always deductible, and if you just bought a home or refinanced in the last few years, the savings are even greater, since more than half your monthly payment goes towards interest.
Taxes are tax Deductible
Many people overlook this deduction! It is true that homeowners can deduct their local and state property taxes on federal tax returns.
Home office Tax Deduction
While this deduction can get complicated (Form 8829 – for actual costs broken down) there is a new simplified home office deduction option if you don’t want to claim actual costs. The simplified standard is $5.00 per square foot up to a maximum of 300 square feet. But be sure that if you claim this deduction that you must maintain the at-home office for your employer’s convenience, not your own. So if you use an office late at night to finish up a report you don’t feel like doing at your desk Monday morning, you cannot claim the home office deduction.
Energy Tax Credits
If you upgraded one or more of the following systems last year, you may be eligible to take a tax credit (up to $500) on your return!
- Biomass stoves
- Heating, ventilation, air conditioning
- Water heaters
There are a variety of different items covered under residential efficiency that count.
(And remember, a tax credit is always better than a deduction. Deductions just reduce your taxable income, while a credit gives you a dollar-for-dollar reduction in your tax liability – so if you get a $300 credit, you will pay $300 less in taxes)
Home improvements (see energy tax credits above) can be eligible for tax relief. Other qualified improvements include home improvements required for medical care (i.e. entry ramps or handicap accessible bathtub).
If you’ve moved 50 miles or more to your new home, because of a job-related move (your move cannot be personal), you may be able to deduct some expenses, given that you have the receipts. Tax publication 521: Moving Expenses