If you became a homeowner this year, you’re probably wondering if there are any itemized deductions for homeowners that could lower your tax bill. The answer is yes, there are itemized deductions you can take, but they will only benefit you if all of your itemized deductions total more than the standard deduction for your filing status.
Real Estate Taxes
In general, real estate taxes that you pay on any homes that you own are deductible. If your real estate taxes are paid out of your escrow account, it cannot be the amount deposited into the escrow account for taxes, but the amount that is actually paid out of the escrow account for your real estate taxes. These amounts may be different. Also, if charges for certain services, such as trash collection, are added to your tax bill, those charges are not deductible.
**Keep in mind: Foreign property taxes are not deductible, and the combined limit for state, local and real estate tax deductions is $10,000.
Mortgage Interest
Mortgage interest on a loan that you have used to buy, build, or substantially improve your first or second home is usually deductible. It can be a first or second mortgage, a refinance, or a home equity loan, but limits do apply based on filing status. If you’re single, married filing jointly, or head of household, that limit is up to a $750,000 loan. If you’re married filing separately, the limit is up to a $375,000 loan. Fees your lender charges to service the loan are not deductible, but points you pay to reduce your interest rate are considered prepaid interest and are deductible.
Other Home-Related Tax Deductions
While real estate taxes and mortgage interest are the two main home-related tax deductions, there are a couple more potential options. They include any expenses paid to make improvements to your home for the medical care for you, your spouse, or a dependent. Also, if the president has declared the area you live in a disaster area, and your home was damaged in the disaster, you may be able to deduct a casualty loss.
Owning a home can save you money on your tax bill in the form of itemized deductions. Call us today to help you figure out which deductions you can take as a homeowner.
**Please keep in mind: Tax laws, eligibility requirements and rates change often, and these lists are not exhaustive. Always contact a tax preparer for the most up-to-date information.