It’s tax season and, by now, you should have received your tax-related forms such as the W-2, the 1099, and/or your Mortgage Interest Statement (1098). If you’ve been wondering which deductions you’ll be able to take advantage of this year, we’ve asked an industry veteran, Lisa Blythe, to give her insight on helping you save some money during your tax appointment.
1. Home Improvements
Before you make any large improvements to your home, be sure to know that the investment will not be tax-deductible. However, in the case that you need to make an improvement or renovation for medical reasons to accomodate a resident with a disability, you may be able to deduct 100% of the costs.
2. Home Energy Credits
You may be able to save some money if you made energy-saving improvements to your home. Under the Residential Energy Efficient Property Credit, equipment such as solar water heaters, geothermal heat pumps, and wind turbines qualify for a 30 percent credit – including labor costs.
If you added energy-efficient insulation, windows, doors, and/or roof, you can receive a deduction under the Non-Business Energy Property Credit although you will not be able to include installation costs. Other improvements that qualify for this credit include high-efficiency heating and air conditioning systems and stoves that burn biomass fuel. Labor and installation costs can be included. These credits allow for a lifetime limit of $500 so keep that in mind in the case that you already claimed this credit in past years.
3. Real Estate Taxes
As a homeowner, you’ve been paying real estate taxes to local and state entities based on the value of your property. These taxes may be deducted come tax time as long as you are living in the home. You can also deduct taxes in the case that you reimbursed the seller. You did or will receive this statement at the time of your closing. However when it comes to the property insurance premiums and HOA fees you’ve been paying, you will not receive a tax deduction. The taxes that you paid to improve the value of your property such as evaluations for sidewalks, sewer lines, etc. can’t be deducted either.
4. Mortgage Interest
Your Mortgage Interest Statement (Form 1098) will show you the amount of interest you paid during the tax year. In the early years of a home loan, tax breaks can be large for some homeowners due to the amount of mortgage interest charged at the beginning of the standard mortgage amortization schedule. The qualifying loan may be a mortgage, second mortgage, line of credit or home equity loan.
Interest that you paid on a refinance loan, home equity loan (up to $100,000), and/or home equity line of credit is also tax-deductible. Remember, if you raised your mortgage debt above your property’s fair market value, some restrictions will apply. Because of these restrictions, some homeowners with several mortgages limit themselves to one million dollars per loan. Loans for more than one million dollars are not eligible for mortgage interest tax deduction.
5. Home Offices
Costs incurred in maintaining an eligible home office such as renovations and telephone lines may be eligible if you work from home.
Remember, every homeowner’s case is different so we recommend that you consult with your accountant or tax professional in order to fully prepare for filing so you can take advantage of additional savings!
Related: Will you be closing on a home this year? Learn about the upcoming changes coming to the opens in a new windowclosing process!
Lisa Blythe is the Director of Marketing at Southern Title in Daytona Beach, FL. She is also a Life Director with the Volusia Building Industry Association (VBIA), and was Affiliate of the Year in 2008. She is an active member of the Daytona Beach Area Association of Realtor and was named Business Partner of the Year in 2012. Lisa handles marketing and publicity for the Women’s Council of Realtors, is active in the local government and government affairs committes with the Daytona Regional & Port Orange/South Daytona Chambers of Commerce, and is Secretary of the Port Orange/South Daytona Rotary Club.