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Don’t fret, the Fed hasn’t decided to do something crazy like move Tax Day to the upcoming month or cancel it all together (wishful thinking).  While we have months to prepare, procrastinate, and poise ourselves for tax season, it’s never too early to understand how you can yield the greatest returns after April comes to a close.

Yes… I’m saying that you can actually take advantage of having to pay taxes!  Yes, that’s right!  Our government offers various tax credit and deduction programs of which you may have previously been unaware.  I’m sure you’re not shooting off fireworks and throwing a dance party upon hearing this revelation, but in the mean time, read on to learn more about how and if you qualify for a tax deduction or credit.

Tax Deductions for Homeowners

Owning your own home is awesome!  No, not because you can choreograph your own routine to Backstreet Boys without being made fun of by the tenants above you.  I happen to think it’s great because homeowners not only have the ability to take interest off the mortgage of their primary residence, they may also take interest on one additional residence as an itemized deduction.  And remember, a tax deduction is taken from your taxable income.  Here’s the rundown:

If you paid discount points for a refinance on your home loan, it can be deducted over the life of the loan.  If you paid points for the purchase of a home, it is deductible in the year paid.

If you acquired private mortgage insurance on or after January 1, 2007, there’s been an extension!  You can deduct the mortgage insurance premiums as mortgage interest through 2011.

Homeowners can also exclude up to $250,000 of gain on the sale of their homes (up to $500,000 for joint filers) if they have owned and lived in their primary residence for two of the last five years before the sale.

Don’t forget you can do a handy-dandy deduction of the following items:

• Mortgage Interest
• Points
• Equity Loan Interest
• Home Improvement Loan Interest
• Property Taxes
• Home Office Deduction
• Selling Costs
• Capital Gains Exclusion
• Moving Costs

Isn’t that amazing?  Savings you’ve never dreamed of could be adding up right in front of your nose!  I, for one, would like to deduct for a home office.  I’ll build the snazziest study cove to type up the most inspirational articles… all while wearing my pajamas.

Tax Credits for Homeowners

I like the term “credit.”  It reminds me of earning credits in college, credit cards, and receiving praise.  Furthermore, credit is pretty sweet because within the realm of taxes, it’s a direct reduction of what you owe (as opposed to a deduction, which comes out of your taxable income…remember we discussed this earlier?).

Unfortunately, homeowner tax credits are hard to come by in this day and age.  However, advances in our technological era have produced breakthroughs in energy efficient appliances.  The government will reward you with green for your use of green energy systems.

So, what’s eligible for an energy efficiency tax credit?  Depending on the state, credits are typically abundant for alternative (i.e. corn, vegetable oil) and plug-in style electric vehicles, but various types of home appliances also qualify.  Here is a brief rundown of credits you may be able to earn (depending on how green your home is):

• Biomass stoves: $300
• HVAC (air-conditioning and heat systems): $50 – $300
• Insulation: 10% of the cost, up to $500
• Roofing: 10% of the cost, up to $500
• Water heaters (non-solar): $300
• Windows, doors, and skylights: 10% of the cost, up to $500 (windows are capped at $200)

Are you so green that you’re starting to resemble Kermit?  Check out the credits available for the most energy efficient and cost-saving products:

• Geothermal heat pump: 30% of the cost, with no upper limit
• Solar energy systems: 30% of the cost, with no upper limit
• Wind energy systems: 30% of the cost, with no upper limit
• Fuel cells: 30% of the cost, up to $500 per .5 kW of power capacity

Let me guess, I’ve got you all fired up for tax season!  It’s a little premature to start calculating your credits and deductions, but certainly not too early to consider beefing up the energy efficiency of your home or keeping track of what deductions to make once April hits.

Stephanie Koske is a writer for Quicken Loans, an amazing place to work.  Find out more about being a part of our team at Quicken Loans and learn how we Amaze our clients.

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