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Tax Breaks That Put More Money in Home Owners’ Pockets - American Trust Escrow
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Tax Breaks That Put More Money in Home Owners’ Pockets

Tax Breaks That Put More Money in Home Owners’ Pockets

Real Estate ConceptNobody likes doing their taxes, but for home owners who are organized and keep records, there are tax breaks that can put more money in your pocket. Working with a tax professional is perhaps the best way to ensure that you’re taking advantage of deductions and credits, but here is a high-level overview of some excellent tax breaks for home owners.

Property Taxes: Home owners are able to deduct both state and local property taxes if they are based on the assessed value of the real property. In order to claim this credit, you need to know how you pay your property taxes. Do you pay them out-of-pocket? If so, find your bills to determine how much you spend. If you pay them via an escrow account like most home owners do, you can find the information on Form 1098.

Mortgage Interest Deduction: For most home buyers, paying with cash is not an option. Instead, they finance their home with a loan that has an interest rate attached. Fortunately, the Mortgage Interest Deduction (MID) is one of the best tax breaks for home owners. Since a large part of your monthly mortgage payments goes toward the interest, you are able to deduct that amount. Ask your lender for Form 1098 to claim this tax credit.

Construction Loan Interest: If you’re building a new home and have taken out a construction loan, you could qualify to deduct interest paid on your loan. This deduction can be used for the first 24 months of the loan, but it’s perfectly fine for construction to take longer than that.

Mortgage Insurance Premiums: One way that lenders protect themselves against default is by requiring borrowers with a loan-to-value ratio of more than 80 percent to carry mortgage insurance. The good news? You can deduct this if your adjusted gross income (AGI) is less than $100,000, or $50,000 if you’re married and are filing separately.

Energy Star: Energy Star appliances and fixtures are a tremendous way to cut down on your monthly utility bills, and they also make you eligible for some tax credits. The return on investment for Energy Star-rated windows, doors and skylights that you install at your primary residence can be significant. Just make sure you install them before the end of the year. If you meet the requirements, the tax break is equal to 10 percent of the cost of the products.