Ditch the EZ for the A
To be sure to take advantage of everything you’re eligible for, you’ll probably want to use the 1040 long form and Schedule A. Yes, it’s more complicated, but it’s essential to detail all your deductibles.
It’s true that some homeowners find that their best route is to claim the standard deduction. But to determine which deduction decision is in your best interest, you’ll first want to first determine the total expenses you can claim as a homeowner, and then compare it to the standard deduction, based on your filing status. (Standard deductions are $5,450 for single taxpayers, $8,000 for heads of household, and $10,900 for married couples filing jointly.)
Develop an Interest in your Interest
Did you know that the interest you pay on your home loan every month is tax deductible? Many homeowners don’t realize that often much of their mortgage payment is going toward interest (the earlier in the repayment schedule of the mortgage, the more of it is going toward interest). This means homeowners stand to greatly benefit from writing off much of their monthly house payment.
The mortgage interest deduction is the primary tax advantage to homeownership, and provides that up to 100 percent of the interest you pay for your home is deductible from your gross income. This perk is designed to make the American dream of homeownership more affordable.
Leveraging your Property Tax
As a homeowner, you probably pay property taxes. Good news! While these taxes help fund the expenses of your local government, the URS also allows you to deduct your property taxes , if you choose to use the itemized federal return.
Don’t remember if you paid property taxes? Simply contact your local municipality. It’s likely your taxes were escrowed and are paid on your behalf by your lender.
Extra Points for Paying Points
If you bought a home this year, or even if you refinanced your loan, the points you paid could be deductible. And here’s a great tip: if you bought a house and points were paid on your behalf by the seller, YOU can actually deduct these points!
Don’t skip the new PMI deduction!
If you pay Private Mortgage Insurance (PMI), then there’s something you should know: a law passed in 2007 now allows for deductions for your PMI payments. If you pay PMI, don’t forget to take advantage of this perk!
Track Your Home Improvements
It’s important to keep all the receipts for each and every home improvement you do on your home. Why? Because homeowners are taxed on home appreciation (gains over 250K for single filers, and $500k for joint filers). The basis of the tax appreciation is calculated is your purchase prices plus the cost of improvements and repairs. So be sure to keep all your recipts for the entire timeyouown your homw, and three years after selling (for calculations of capital gains tax).
New stimulus Incentives.
Last year, the government announced a $7,500 tax credit for first-time home buyers – defined as someone who hasn’t owned a home in the past three years. In January 2009, President Obama upped the tax credit to $8,000 for homes purchased between January 1 and November 30 of 2009. Some income restrictions apply.
This is great news for millions of Americans buing a home for the first time (or the first time in three years!).
Your key to itemized deductions: Form 1098
How can you be sure to get all your deductions? All the important items – like PMI, Interest, Points, and Property Tax – are listed on the essential Form 1098 you received from your lender. By law, your lender should have sent out this form. Sometimes they don’t look like tax forms, but they should say 1098 Form somewhere on them.
We hope these tax tips can help you get the most from this tax season. You can also watch our helpful video! To get the most out of this or any tax season, we urge you to contact a tax professional to find out specifics for your unique situation.
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