Tax breaks for homeowners you should take advantage of

Tax benefits of being a homeowner extend beyond the common mortgage interest deductions.

There are a number of advantages to owning your own home. Being able to make changes at will without the approval of a landlord, building equity in a place that is all yours and the simple joy of owning a piece of the American dream are just a few reasons to buy a house.

Another great reason is the tax benefits. Homeowners in America enjoy a wide variety of tax breaks and taking advantage of all of them is key to getting the most out of your home. While the tax benefits can be huge, it is important to remember that to take advantage of these deductions you will have to put in a little extra work at tax time. In almost all cases you will have to itemize which means you cannot use an EZ form.

While the majority of homeowners are aware of the mortgage interest deduction, the tax benefits of being a homeowner extend beyond this one deduction. Lets take a look at a few of the more beneficial deductions offered by the IRS:

Mortgage and Interest Points

Your mortgage interest is deductible provided your total itemized deductions are greater than the standard deduction. There is a $1million limit so if your mortgage is over that amount you cannot take the deduction. If the mortgage is new this year and you paid points on it, those are deductible in the year that the points were paid.

The interest paid on a second home is also deductible. Your second home can even be an RV or boat as long as it has bathroom, cooking and sleeping facilities.

When it comes to vacation homes you do have to be a bit careful. If you don’t stay at your second home at least 14 days a year or more than 10 percent of the number of days you rent it out the IRS will consider it an investment/rental property and the deduction will be gone.

Property Taxes

You can also deduct the money you pay for real estate property taxes. It doesn’t matter if you paid these taxes when you closed on your loan or if you pay them directly to the taxing authority in your state/county. Remember to exclude any non-qualifying expenses that are added in to your tax bill. Examples would be pre-paying sewer, trash or other utilities in your tax bill, these would not qualify for a deduction.

Home Office

Working from home has advantages that extend beyond heading to the office in your pajamas. The home office deduction can offer big savings on your taxes and in most cases you don’t have to work solely from home to claim this deduction. It is best to check with a tax professional to see if the amount of time you work in your house qualifies.

There are two ways to calculate the deduction so try both ways to see which one will give you the bigger tax benefit. The simple method offered by the IRS is to measure the square footage of your office and multiple that number by $5.00.

The more complicated method entails deducting your actual expenses as a percentage of the homes size. This can result in a bigger deduction but its more complicated to calculate.

Energy Efficiency Gains

There are certain improvements that are eligible for tax credits, mainly related to making your home more energy efficient. Upgrading a roof, water heater, doors or windows could result in a tax credit of 10 percent of the cost up to $500. When it comes to major projects, such as adding a solar power system to your house, the credit can be up to 30 percent without a cap.

Medical Improvements

Improvements made to your home to help accommodate a disabled or chronically ill person are usually 100% tax deductible. If you have to make changes to your home due to an elderly parent or family member moving in, you should be able to deduct the full cost. Check with your tax expert to make sure the improvements qualify.

This year make sure that you take advantage of all of the tax benefits that your home has to offer.