What Deductions Can I Claim on My Income Tax for a House I Own?

by Beverly Bird, Demand Media
    Homeownership comes with a few tax perks.

    Homeownership comes with a few tax perks.

    Home ownership is usually a pretty good reason to itemize your deductions at tax time. You can claim a great many of your costs as deductions if you elect not to take the standard deduction and complete Schedule A instead. This also means filing Form 1040, not Form 1040A or 1040EZ, but it could be well worth it.

    Mortgage Interest

    The majority of the check you write each month for your mortgage payment is probably interest on the loan, especially if you purchased your home recently. This interest is fully deductible if you itemize, whether you're living full time in the house or if it's your second home. The only exception is if you're married and filing a joint return, and you took out a mortgage for $1 million or more. If you're single, or married and filing separately, your mortgage limit is $500,000. In this case, you won't lose your interest deduction entirely, but you'll be restricted to deducting only a portion of it. The mortgage interest rule applies to both first and second mortgages, as well as home equity loans or home improvement financing. You can also deduct prepayment penalties if you pay your mortgage off early.

    Property Taxes

    Your property taxes are also fully deductible. If your taxes are included in your mortgage payment, and if your lender places this money in escrow each month then pays your county or municipality on your behalf, you can only deduct what your lender actually pays in taxes, not necessarily the total of what went into escrow. The Form 1098 your lender sends you will include the correct amount. You can also deduct any real estate taxes you pay directly.

    Insurance Premiums

    Deducting insurance premiums for your house is a little trickier. If you're paying private mortgage insurance because of a lack of equity in your home, the IRS may or may not allow you to deduct it. If you're married and filing a joint return, and if your adjusted gross income is $100,000 or more, these premiums are not fully deductible. If you're single or married and filing separately, your AGI cannot top $50,000. If you're married and your AGI is more than $109,000, or more than $54,500 if you're single or married and filing separately, you lose this deduction entirely. Other than this PMI provision, insurance premiums normally aren’t deductible unless the insurance is provided by the Rural Housing Administration, the Federal Housing Administration or the Veterans Administration.

    Energy Efficient Improvements

    If you make improvements to your home under the federal Energy Star program, this will save you some money at tax time as well. Installing approved skylights, doors or windows doesn't result in a deduction, but it will earn you a tax credit, which comes directly off the bill you owe the IRS. The credit can be as much as $200 for skylights and windows, or $500 for doors. These expenses only qualify, however, if the improvements are done to your primary residence. Second homes don't count.

    About the Author

    Beverly Bird has been writing professionally since 1983. She is the author of several novels including the bestselling "Comes the Rain" and "With Every Breath." Bird also has extensive experience as a paralegal, primarily in the areas of divorce and family law, bankruptcy and estate law. She covers many legal topics in her articles.

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