Archive | April, 2013

Filing Last-Minute Taxes? Here Are Eight Tax Breaks Homeowners Love to Receive

9 Apr

Tax time is fast approaching and if you’re like most Americans, you either filed way back in January or you’re scrambling to get them in before April 15th rolls around. With the housing market on fire lately, there are lots of new homeowners filing taxes this year and with the right knowledge, there is much money to be saved! Here are eight tax breaks available to homeowners that make tax time a little more bearable.

Interest Deduction on Construction Loans
Last year marked the comeback for new construction in many areas of the nation, with more and more buyers building to suit their own needs rather than buying existing homes. When a parcel of land is sold and a construction loan is taken out – you can deduct the interest paid on that loan.

There are some specifics though, so be sure to share the details with your tax pro and be prepared to show that the loan was for either your principal residence or second home used only for personal purposes.

Deductions on Mortgage Interest Paid At Closing
This is a favorite of homeowners since they are usually filling taxes for the first time after buying a new home and most new homebuyers can use every dime that comes to them. Toward tax time or during the beginning of the year, our lender will send a statement outlining that amount specifically. The only requirement to be able to deduct mortgage interest from your settlement is that you itemize your deductions using a Schedule A form.

Costs Associated With Purchase or Refinance Points Can Be Deducted
Mortgage fees that stem from points paid to bring down the interest rate can be deducted. There are some varying rules depending on whether the points were for a purchase or a refinance but the deduction quickly adds up in savings.

State and Local Property Tax Deductions
Cash paid for property taxes can be deducted when they are according to your home’s assessed value. The municipality will send a letter with the amount that is deductible, or you can check with your tax professional. For homeowners that pay their taxes through escrow, the deductible amount only applies to funds taken out of escrow and paid.

Private Mortgage Insurance Premiums
Though not always deductible, a lot of homeowners benefit from this deduction of the premiums paid on mortgage insurance. It applies for principal residences as well as second homes used for personal use by the owner. This is ideal for homeowners with an adjusted gross income of $100k or less or $50k for those married but filing separately and it works for insurance premiums paid during the current tax year.

Renovation or Rehab Loan Interest Deductions
When you improve your home and get a loan to cover those costs, as long as you are making improvements to the house that will increase its value, you may be able to deduct the interest from that loan. This only applies to major renovations such as updating kitchens, bathrooms, installation of new structures or other things that will increase the home’s value.

Costs Associated With Selling a Home Can Be Deducted
Every year sellers file their taxes without realizing they can deduct some of the expenses from when they sold their home. This includes things like broker fees, title insurance, expenses from advertising or repairs done during the process. There are some guidelines to follow such as the 90-day window of time within which repairs must me made from the time of sale.

Home Office Expense Deductions
If you are like countless Americans that use a designated portion of their home as an office, you can deduct expenses related to operation, maintenance and upkeep of the space. The important thing to know about this deduction is that your home office must be designated space in your home used just for this purpose. Space used to store things related to your business also applies.