Tax Season is Upon Us, Friends!
As we approach paying Uncle Sam, (and you are a homeowner) there are some sizable deductions you do not want to miss out on. (Sit back, pour yourself a glass of Wine, and read up!)
1. Mortgage Interest
Home mortgages are structured so that a huge chunk of each payment you make in the initial years of owning your home goes toward paying down the interest on your loan and only a little goes toward the principal.
This is one of your largest deductions – not only does it apply to home purchases but also refinanced mortgages, HELOC’s, and 2nd Mortgages.
This deduction is filed using an IRS Form 1098 – and can save you THOUSANDS. Watch out for a statement from your lender (should have come the end of 2016/beginning of Jan.) to let you know how much interest you paid.
What is the benefit? It reduces your taxable income – so you don’t owe as much!
If you bought a home in 2016 – you get an added bonus deduction! Yahoo. POINTS. If you paid Mortgage Points, which can mean, Discount Points (Pay a fee to ‘buy-down’ rate and obtain a lower rate) OR an Origination Fee. (Fee to originate the mortgage, charged by the Lender) Many homeowners forget these two deductions!
Don’t forget for all you 2016 Homebuyers!
Easy Numbers – Say you bought a home in Seattle for $500,000 with 1 Point – That is $5K you can itemize as a deduction on your Tax Bill!
3. Property Taxes
You are able to write off your annual property taxes – which is another plus! Is you are paying your taxes/insurance, this tax amount should be itemized on your 2016 year end statement.
Also, Pierce/ and King County assessor’s office sends out a statement at the beginning of each year showing your tax amount.
4. Mortgage Insurance Premium
This only applies if you put less than 20% Down Payment. Mortgage Insurance Premium (MIP) as well as VA, FHA, and USDA (Rural Areas of PNW).
Here’s an IRS list of special situations and other nondeductible items related to home-ownership.
5. Energy Efficient Upgrades! (Holler!)
The Nonbusiness Energy Tax Credit lets you claim a credit for installing energy efficient home systems. Tax credits are especially valuable because they let you offset what you owe the IRS dollar for dollar for up to 10% of the amount you spent on certain upgrades.
The credit caries a lifetime cap of $500 (less for some products), so if you’ve used it in years past, you’ll have to subtract prior tax credits from that $500 limit. Lucky for you, there’s no cap on how much you’ll save on utility bills thanks to your energy efficiency upgrades! (File Form: Form 5695 with your return.)
Among the upgrades that might qualify for the credit:
Heating, ventilation, and air conditioning
Roofs (Metal and asphalt)
Water heaters (non-solar)
Windows, Doors, and skylights
We hope this helps! If you are in need of a great Tax Accountant in our area – we are happy to give you the contact information of the CPA we recommend.
There is massive rewards in Homeownership – and your tax deductions can add up!