Tax breaks when you own a home. It’s your money so learn how to keep more of it. If you are a homeowner, you are probably well aware of deductions when tax season comes around. Homeowners who itemize their taxes are able to deduct 100% of their mortgage interest and property taxes from their income tax returns.
But how do you get the maximum tax refund for homeowners? If you don’t own a home yet, there may be good reasons, but the advantages of owning a home generally far outweigh renting or leasing.
If you are confused about how to file taxes and your tax refund, you’re not alone. The tax preparation market offers many different options, so finding the right one can be difficult. H&R Block and Turbo Tax are among the leaders in tax preparation, but you can still file on your own. Tax software can help you with the important details and efficiency for state and federal tax filing. Tax payers with an adjusted gross income (AGI) of $57,000 or less can also use Free File from the IRS site.
Everyone can use the Free Fillable forms that work with brand-name software. Depending on your AGI, you may be able to prepare and e-file your federal return for free. Participating software companies make their products available through the IRS and some also support state tax returns.
The major tax incentive to owning a home is that it allows you to deduct the interest you pay for your mortgage. This is usually the biggest tax break for most people, because a significant amount of your house payment goes toward interest during the early years of a mortgage. Americans took $70 billion in mortgage interest deductions last year according to the Congressional Research Service (CRS), saving Americans who owned homes about $1,900 a year. This is very helpful to home buyers whose early monthly payments in a 30-year loan are mostly interest.
The major advantages of being a homeowner when tax season comes around?
Deductible mortgage interest including “points” when you buy your home.
Deductible property taxes on your return.
Deductions for improvements made to your home when you sell.
Home improvements made for medical reasons can be tax-deductible under certain circumstances.
Up to $500,000 in tax free capital gains profit when you sell your home.
To get the maximum tax refund will have to use Form 1040. To take advantage of the tax breaks allowed homeowners, Schedule A of the IRS Form 1040 must be completed to itemize your deductions. If you’re in a 25% tax bracket, the government effectively subsidizes about a third of your borrowing costs, making your home more affordable . Also, your closing costs and points are tax deductible, along with any capital gains when you sell your home.
All homeowners should be asking, “Are my home improvement purchases tax deductible?” The answer is yes, maybe yes and maybe no. You can deduct “improvements”. You can’t deduct “repairs”. One thing you will need to do: You’ll need to keep track of all those home improvement expenses.
Improvements are things like installing central air conditioning, replacing or building a new deck or replacing the roof. These are things that add value to your home. You generally can’t deduct the cost in the year you spend the money. But keep track of those expenses, they may help you reduce your taxes in the year you sell your house.
Repairs are things like painting your house, replacing a faucet or getting new carpet. And under the IRS tax code, repairs, renovations and general maintenance of your personal residence are nondeductible personal expenditures.
Tax credits for residential energy efficiency. This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home. Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
When you make a home improvement, such as installing central air conditioning, adding a sunroom or replacing the roof, you can’t deduct the cost in the year you spend the money. But if you keep track of those expenses, they may help you reduce your taxes in the year you sell your house
From the IRS: April 15 is the due date for filing your federal individual income tax return if your tax year ends December 31st. Your return is considered timely if the envelope is properly addressed and postmarked no later than April 15. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. If you cannot file by the due date of your return, then you can request an extension. However, an extension of time to file is not an extension of time to pay. You will owe interest on any past-due tax and you may be subject to a late-payment penalty
We recently posted the five essential tax tips to get the maximum tax refund for homeowners. Continue reading Maximum Refund for Homeowners.