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Home Ownership
Deductions for Homeowners
Homeowners can claim many
write-offs to lower their tax bills --
provided that they itemize.
There are deductions for
mortgage interest, mortgage points and
real-estate tax payments. Plus if you
sell your home, most likely you won't
have to pay taxes on the profit with the
homestead exemption.
Some of the homeowner
deductions include:
- Mortgage interest, up
to $1.1 million as long as you use the money
to buy, build or improve on your home
and the loan is secured by your home.
- Home-sale exclusion.
Up to $250,000 of profit from the
sale of your home can be tax free;
$500,000 if you are married an file
a joint return. To qualify, you must
own and live in the house for
periods totaling two years out of
the five years leading up to the
sale.
- Boats as homes. boats
that have eating, sleeping and
sanitary facilities can qualify as a
first or second home, so you can
deduct mortgage interest, unless you
are subject to the alternative
minimum tax, then this write-off is
not allowed.
- Recreational vehicle.
If your RV has cooking, sleeping and
sanitation facilities, interest on a
loan used to buy it can qualify as
deductible mortgage interest on a
first or second home. If you are
subject to the alternative minimum
tax, interest is not deductible.
- Energy credits. You
can claim a credit for energy-saving
home improvements made such as
outside doors, windows, pigmented
roofs and high-efficiency furnaces,
water heaters and central air
conditioners installed in your
primary home. There's a bigger
credit for those who installed solar
units used to heat air or water.
- First-time homebuyer
credit. A new $7,500 tax credit is
available for your first home
purchase. You are considered a
first-time home buyer as long as you
did not own a home during the three
years leading up to the purchase of
your new home.
- Home-office
deduction. You can deduct the costs
of a home office that you use
exclusively and regularly for
business. To qualify for the tax
break you must either meet with
clients there regularly, or the home
office must be your principal place
of business (unless it is not
attached to your house). This
includes depreciation, utilities and
insurance for the office portion of
your home.
- Moving expenses. If a
move is connected with taking a new
job that is at least 50 miles
farther from your old home than your
old job was, you can deduct travel
and lodging expenses for you and
your family and the cost of moving
your household goods.
- Casualty loss. If
your home was damaged or destroyed
-- by fire or storm, for example --
you may be able to deduct a casualty
loss on your return.
- Points you pay to get
a mortgage for your principal
residence are generally fully
deductible in the year paid.
- Real estate taxes.
You can deduct state and local real
estate taxes paid during the year on
any number of personal residences
you own.
- Refinancing points
paid when refinancing are deducted
over the term of the loan.
- Reverse mortgage.
Amounts received under a reverse
mortgage -- either a lump sum
payment or periodic payments are tax
free.
- Tax-free rental
income. If you rent out your home
for 14 or fewer days during the year
the rental income is tax-free,
regardless of how much you make.
Many more home owner
deductions may apply to you and taking
advantage of them will always keep more
money in your pocket!
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