Now that you’ve upgraded from renter to homeowner, you're probably starting to enjoy all the benefits of having a place that’s truly yours–you know, things like cutting your own lawn and fixing that dripping faucet. OK, maybe those aren’t among the many perks of being a homeowner, but you’ll definitely see the benefits when you file your taxes and you can enjoy all the deductions that are now available to you.
Interest and Points
In most cases you can deduct the interest you pay on your mortgage loan. As with most of the applicable homeowner deductions, you'll have to itemize your deductions, which means that it may take a little longer to fill out your tax forms. But the benefits are worth the extra time. In other words, you can't fill out the 1040 EZ form anymore. Deductible mortgage interest can be for a first or second mortgage, home improvement loan or home equity loan. Mortgage points are also deductible over the course of the loan. In a single tax year, for instance, you can only deduct 1/30 of the points you paid on a 30-year mortgage.
You won’t get a break on your regular homeowner's insurance, or flood and fire protection. But you can deduct the amount you pay for mortgage insurance premiums, as long the insurance is provided by the Veteran’s Administration, Federal Housing Authority, Rural housing Administration or a qualified private mortgage insurance provider.
The words “taxes” and “good news” aren’t usually heard in the same sentence but there is definitely good news when it comes to all those local and state real estate taxes that you've been paying. According to the IRS, you can deduct any real estate taxes that you paid to your local tax authority as long as the taxes are based on the assessed value of the property, and the taxing authority charges the same fees for other properties in the same jurisdiction. If you just bought your home, you probably paid a portion of the annual taxes and the sellers paid the taxes for the time that they owned the home leading up to closing, so you can only deduct the amount that you paid.
If you moved into your new home because of job relocation, you may be able to deduct the moving expenses associated with the relocation, as long as the new job is at least 50 miles away from the previous job. If you work from home you may be able to deduct some expenses for your home office. Changes made to a home to accommodate a disabled or sick person are also deductible, provided the changes do not add value to the home.
- tax forms image by Chad McDermott from Fotolia.com