1. Mortgage Payment Interest Deduction
When you own a home that you're paying a mortgage on, you can deduct the interest paid on up to $1 million worth of loans. This deduction is particularly beneficial to new homeowners because you pay more interest in the beginning. In order to claim this deduction on your tax return, you'll need to file an itemized tax return. Your loan provider should send you a Form 1040 shortly after the tax year ends that shows how much you've paid in interest for that year.
2. Mortgage Points Deduction
Many homeowners overlook the deduction of points that may have been paid to secure the mortgage loan in the first place. Since mortgage points are prepaid interest, they also qualify for a deduction. While interest rates are currently low, buying points is still one of the best tax breaks available to new homeowners. The return on investment is two-fold because you get to deduct the cost of the points and the amount paid in interest in the same year as the home purchase.
3. Tax-Free IRA Withdrawals
As a first-time home buyer, you are able to pull funds from an IRA to help come up with the downpayment on your home without paying the typical penalty. Those funds can then be used to cover a downpayment, the closing costs and other expenses associated with becoming a homeowner for the first time.
4. Real Estate Tax Deduction
Taxpayers who itemize their deductions are also eligible to deduct real estate taxes paid on both their primary and secondary residences, as long as they were paid within the year for which you're filing. This deduction is only available for homes you own; you can't claim taxes you paid for someone else's property.
5. Home Improvements Deduction
There's a possibility that you can claim a deduction for home improvements made over the past year as well. You can qualify for these deductions one of two ways. First, if you use a home equity loan or other loan secured by your home to finance the improvements, those loans will qualify for the same mortgage interest deduction discussed above. Second, when you sell your home, you can include the cost of improvements when determining your capital gains or losses on the sale. If your home sells for more than you paid for it, that extra money is considered taxable income; however, you can lessen your tax liability by writing off those home improvement costs. Make sure you keep track of any home improvement costs by keeping all your receipts so you can prove the costs you claim.
6. Home Office Deduction
If you work from home, you can take a deduction for the room or space used as your office. This can even include working from your garage if you have your own repair business. The deduction can include expenses like mortgage interest, insurance, utilities and repairs, and it is calculated on the percentage of your home devoted to your business activities. Just make sure that the workspace information you provide to your tax preparer is as accurate as possible. There are specific requirements for taking this type of deduction.
7. Home Energy Tax Credits
When you take steps to make your home more energy efficient, you can offset those improvement costs with the Residential Energy Efficiency Property Credit. You could save up to 30% of the total cost of installing certain renewable energy sources in your home. Keep all receipts and contracts from the installation to prove your claim on your tax return.
Be sure to talk with your tax professional to see what tax deductions you might qualify for. If you have yet to become a homeowner, talk to a mortgage lender at the Lake of the Ozarks about financing. Maybe next year you can take advantage of these deductions and credits, while also living in your dream home at the Lake of the Ozarks! For all your Lake of the Ozarks mortgage needs, give us a call at 573-746-7211.
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Michael Lasson
Senior Loan Officer
NMLS #: 493712
4655 B Osage Beach Parkway
Osage Beach, MO 65065
Direct: (573) 746-7211
Cell: (573) 216-7258
Fax:(866) 397-0318
Email: mlasson@fsbfinancial.com
**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.
