Many do not take advantage of home tax deductions. Tax advisors will tell you this is because homeowners aren’t even aware that these deductions exist.
Homeowners can claim several write-offs that will lower their taxes.
You and your spouse can deduct for mortgage interest payments up to a millions dollars. Your mortgage debt must be secured. Both first and second home qualify.
1. Mortgage Points
Mortgage lenders often use a point system. One point equates to 1% of the principal of your home loan. These fees are often one to three percent of the home loan. The fees are tax deductible as long as they are part of the process of purchasing a home. Refinancing your home the points are also fully deductible, but not up front. Refinancing points’ fees can write off over time and in conjunction with the remainder of your old points.
2. Profits on Selling Your House
If you sell your house, depending on your personal circumstances, you may not have to pay taxes on the profit. If you’ve had the house for less than a year, you could write off expenses you didn't even pay. Checking with a tax consultant can often save you significant sums.
3. Property Taxes
Turbo Tax accountants points out that a homeowner is legally allowed to deduct the total second home's mortgage interest on mortgages of a maximum of $1.1 million as long as this is not a rental property. As well, all property taxes are deductible.
The situation changes if this second home is rented out. If the property is rented for fourteen days or less annually, the rental income does not have to be declared. If it is rented for more than fourteen days, the rent must be declared for the year.
However, if the rent must be declared because it was rented for fourteen or more days, the owner can claim such rental expenses as: mortgage interest, property taxes, insurance, property management fees, utilities, and half of the depreciation.
4. Boats loan interests
Do you have a boat? If it has eating, sleeping, and bathroom facilities, it may qualify as a first or second home. You could deduct mortgage interest paid on the loan for the purchase of your boat. Check this out with a tax consultant.
5. Home Depreciation
You may be able to claim depreciation on your home. There is a variety of ways that home depreciation may be claimed. However, the exact situations are dictated by specific legal situation. In this circumstance, you should consult with a tax professional, but be sure to tell them if you have claimed depreciation on a home you sold.