As the deadline to file income taxes approaches, we need to take a new look at the changing tax landscape for homeowners. Thanks to the efforts of many real estate industry groups like NAR, many of the tax benefits that homeowners enjoy have been protected and extended through the 2017 tax season. Not necessarily through 2018 though.
- Mortgage Interest Deduction
Homeowners who itemize their deductions can still deduct the interest paid on a mortgage with a balance of up to $1 million.
- Home Improvement Loan Interest Deduction
The interest on home equity loans used for “capital improvements” to a home can also be a tax deduction. On home equity loans with balances of up to $100,000, the interest is tax-deductible for a homeowner who uses the loan to make improvements to the home such as adding square footage or for a remodeling project.
- Private Mortgage Insurance (PMI) Deduction
Homeowners who make a down payment of less than 20 percent are often paying some sort of Private Mortgage Insurance. If your mortgage was originated after Jan 1, 2007, and you have PMI, it can be a tax deduction. The deduction is phased out, 10 percent per $1,000, for taxpayers who have an adjusted gross income between $100,000-$109,000 and those above that level do not qualify.
- Mortgage Points/Origination Deduction
Homeowners who paid points on their home purchase or refinance can often deduct those points on their tax returns. Points, often called origination fees, are usually percentage-based fees which a lender charges to originate a loan. A one percent fee on a $100,000 loan would be one point, or $1,000.
On a home purchase loan, taxpayers can deduct the entirety of the points that they paid in the same year. On a refinance loan, the points must be deducted as an amortization over the life of the loan.
- Energy Efficiency Upgrades/Repairs Deduction
Homeowners can deduct part of the cost of the building materials used for energy efficiency upgrades to their home. This is actually a tax credit, one which is applied as a direct reduction of how much tax you owe, not just a reduction in your taxable income.
10 percent of the total bill for energy-efficient materials can be used as a tax credit, up to a maximum $500 credit. Insulation, doors, new roofs, and many other items qualify for the energy efficiency credit. There are also individual limits for certain items, such as $150 for furnaces and $200 for windows
The above is for information purposes only. Tax regulations change frequently so before making any of these or any other deductions on your tax return it is essential that you first discuss them with a qualified CPA or tax specialist.