When you own your home, you are going to be eligible for some tax deductions. Many of the deductions available will relate to the mortgage you have, but others relate to the use of the property and the reason for buying. It is important that you know what tax deductions you can get so that you can take advantage of them.
Mortgage Interest Deductions
When you take a mortgage to buy a home, you can deduct all of the interest payments. There are some restrictions to these deductions with the first being that the mortgage cannot exceed $1 million. You will also only be able to deduct the interest on the mortgage if you are married and have filed jointly. If you are married, but filing your tax separately then the amount will be limited to $500,000.
The mortgage will also need to be secured by a first or second home. Additionally, if you have paid in full for the property, then you will not be able to take out an equity loan later using the house as collateral and deducting interest from that loan. There are some additional regulations to these deductions that you will be able to find out about on the IRS website.
Interest On Home Improvement Loan
If you have taken out a loan to complete home improvements, then you will be able to deduct the interest from your taxes. It is important that the loan you take out is being used for improvements only and not for repairs to the house as loans for repairs cannot have their interest deducted. To qualify for this deduction the loan needs to be taken out to add capital improvements to the property, adapt it for new users or extend the life of the property.
Property taxes that you pay can be fully deducted from your income tax when using Form 1040. However, if you have decided to hold your money in escrow to pay the property taxes, then you will not be able to claim the deduction until the money has been taken out of escrow. Additionally, if you have received a partial refund of the property taxes, then the amount that you can deduct will be reduced.
Home Office Deductions
If you are using your home as a home office, then there are certain deductions that you can make. In order to qualify for this deduction part of your home will need to be exclusively and regularly used as your place of business or part of your home needs to be regularly used for storing items that are used in your business such as stock. If your home is being used in this way, you will be able to deduct costs such as insurance, repairs, and depreciation from your taxes.
The Moving Costs
Deducting moving costs are only possible if you have had to move for a job and you meet certain requirements. The new job needs to be at least 50 miles from your previous residence and where your last job was. You will also need to be working full-time for at least 39 weeks of the year before your move. You will also not be able to deduct all of the moving costs, but costs you can deduct will include lodging, transportation, and storage.
There are some tax deductions that you can make as a homeowner, and it is important that you take advantage of this. Most of the deductions will relate to the interest of loans made to purchase or improve your home.