Posted on January 1, 2016 - 07:38 PM
From mortgage interest to property tax deductions, here are the tax tips you need to get a jump on your returns.
1. Mortgage Interest Deduction
Interest you pay on a mortgage of up to $1 million -- or $500,000 if you're married filing separately -- is deductible when you use the loan to buy, build, or improve your home.
2. Prepaid Interest Deduction
Prepaid interest (or points) you paid when you took out your mortgage is generally 100% deductible in the year you paid it along with other mortgage interest. If you refinance your mortgage and use that money for home improvements, any points you pay are also deductible in the same year.
3. Property Tax Deduction
You can deduct on Schedule A the real estate property taxes you pay. If you have a mortgage with an escrow account, the amount of real estate property taxes you paid shows up on you annual escrow statement.
4. PMI and FHA Mortgage Insurance Premiums
You can deduct the cost of private mortgage insurance (PMI) as mortgage interest on your Schedule A if you itemize your return. The change only applies to loans taken out in 2007 or later.
5. Vacation Home Tax Deductions
The rules on tax deductions for vacation homes are complicated. Do yourself a favor and keep good records about how and when you use your vacation home.
If you're the only one using your vacation home (you don't rent it out for more than 14 days a year), you deduct mortgage interest and real estate taxes on Schedule A.
6. Homebuyer Tax Credit
This isn't a deduction, but it's important to keep track of if you claimed it in 2008.
If you claimed the homebuyer tax credit for a purchase made after April 8, 2008, and before Jan 1, 2009, you must repay 1/15th of the credit over 15 years, with no interest.
7. Energy-Efficiency Upgrades
The nonbusiness Energy Tax Credit lets you claim a credit for installing energy-efficient home systems. Tax credits are especially valuable because they let you offset what you owe the IRS dollar for dollar, in this case, for up to 10% of the amount you spent on certain upgraded.
This article provides general information about tax laws and consequences, but shouldn't be relied upon as tax or legal advice applicable to particular transactions or circumstance.
Consult a tax professional for such advice; tax laws may vary by jurisdiction.
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