Image by blmurch via Flickr
The new year is solidly underway, and that means that tax season is upon us. As you start looking at your tax situation, and the possibility of tax breaks related to owning a home, it can help to have a quick refresher on what’s out there with regard to what your home can do for you in terms of tax breaks.
Before you tax a tax deduction or credit, though, it is important to carefully consider your options, and the implications of your decision. You should look at your options, and possibly consult with a tax professional or visit the IRS web site to make sure all of your ducks are in a row, and that you are properly taking your tax breaks.
Some of the tax breaks that are worth looking into, with regard to your home, include:
- Mortgage interest: Mortgage interest is one of the biggest things. You can itemize your mortgage interest, and your points, on Schedule A. In some cases, you might have a big enough deduction that you can exceed the standard deduction. Another consideration is the points that you pay if you have bought a new home or refinanced. PMI premiums are also tax-deductible on Schedule A.
- Property taxes: You also get a tax break for what you pay in property taxes. So don’t forget to include this in your possible itemized deductions.
- Home buyer tax credit: If you have bought a new home recently, or if you are buying before the end of April 2010, you might be eligible for the first time home buyer tax credit of up to $8,000. This tax credit can also be used immediately to help furnish your down payment. Even if you aren’t a first time home buyer, you might be able to take advantage of a $6,500 tax credit aimed at those who are “trading up.”
- Green home improvements: If you made some green upgrades to home in the last year, you might be able to see a tax break. Some green home improvements made in 2010 also qualify for a tax break. If you are considering new windows, an energy efficient furnace or water heater, solar panels, wind energy, or even just more insulation for your home, you might be able to see tax credits for your expenses. On top of this, there are some state and local tax breaks, as well as programs to help with reduced cost financing. You can get more information at www.energystar.gov.
- Energy efficient appliances: Your home needs an appliance upgrade, you might be able to enjoy a tax credit. The government is rolling out a programs kind of like the successful “Cash for Clunkers” program in the summer of 2009. If you replace your old appliances with new, energy efficient models, you can get a tax break. However, this program is administered by states, so you will need to check with your state to see what sort of incentives are available.
In the end, the cost of owning a home and keeping it up can be quite high. The good news is that there is government help for these costs. You just have to know where to look.