Itemizing Key in Maximizing Tax Deductions for Homeowners
Tax incentives are one of the many benefits homeowners can take advantage of every year. It is important for homeowners to know exactly what home-related expenses qualify for tax deductions so they can maximize their yearly earnings. Itemizing deductions, rather than filing standard deductions, is key in taking advantage of these tax breaks.
Some of the expenses homeowners can deduct include mortgage interest, real estate taxes, and private mortgage insurance premiums. These tax breaks are available for any type of residence, whether it be a mobile home, single-family residence, town house, condominium, or cooperative apartment. Selling a residence can benefit homeowners as well.
This year, homeowners are able to claim a new deduction—energy-efficient home upgrades made in 2014. The residential energy tax credit can potentially cut tax bills by up to $500. Homeowners may be able to claim up to 10 percent on 2014 purchases, including insulation, a new roof, windows, doors, or high-efficiency furnaces or air conditioners.
A separate residential energy-efficient property credit, in effect through the end of 2016, gives credits of up to 30 percent for qualifying alternative energy improvements.
Other possible tax deductions include mortgage lender points, equity loan interest, home improvement loan interest, home office expenses, mortgage tax credits, moving expenses, and capital gains exclusion.
It is important that homeowners keep accurate records to properly report their deductions. Keeping purchase contracts, settlement papers, receipts, and canceled checks can prove to be beneficial when filing taxes (and are also useful to have for potential audits).
Homeowners may find it tedious to itemize tax deductions, but most will find that the outcome is well worth it.