As tax season rolls around, you’ll see why buying a home is a really good idea… for your wallet. Did you buy your first home in 2013 or are you considering purchasing one this year? Here are a few of the tax deductions that come from buying and owning a home:
This is typically the biggest tax break homeowners receive. Your lender will send you Form 1098 in January, which shows the amount of interest you paid over the year. Use this form and deduct the amount.
Private Mortgage Insurance Premiums
If you make a down payment of less than 20% on a home, you will be required by your lender to pay a Private Mortgage Insurance (or PMI). This year is likely the last year Uncle Sam will be offering this tax incentive, so if you’re already a homeowner then you are in luck!
Points are a percentage of the purchase price you may pay a lender to secure the loan. It’s kind of like your lender’s commission for supplying you the loan. You can deduct points up to the amount you put down for the home. So, if you put down $4000 on your $200k home, then you can deduct $4000, or 2 points.
You can deduct your local property taxes. If you purchased your home the previous year (i.e. 2013), then be sure you deduct the property taxes for which you reimbursed the seller at closing. That amount will be on your settlement sheet.
You can get a credit for certain energy-efficient improvements you have made to your home for 10% of the cost of the improvements, up to a $500 credit. 2013 may be the last qualifying year for this tax break.
You cannot deduct improvements or repairs made to your home, but keep the receipts for when you sell your home. The expense of any improvements made to the home can be added to the cost basis of the home when you sell for tax purposes.