By: Jeannette Brown
A huge benefit of homeownership is a variety of tax deductions that you should be aware of before you file your returns with the Internal Revenue Service. It’s important to consider each home tax deduction and credit you are entitled to, as well as avoid common tax-filing errors.
First, be sure to deduct the property tax expense on your return for the year you paid it. Keep in mind that it could be different than the year it was due.
Another item to think about is whether you spent money on certain home energy-efficiency upgrades. If you did, there is a tax credit that will work in your favor (not to mention the savings you’ll enjoy on your utility bill after you’ve installed the energy upgrades).
If home repairs were conducted, it’s worth noting that you can only claim deductions if part of your home is used for business or casualty losses. Be sure to discuss these types of deductions with a tax adviser so you don’t run afoul of IRS rules.
Also, if you purchased your home with a down payment of less than 20 percent and utilized Private Mortgage Insurance, then 2013 is the last year you will be able to claim the PMI deduction since Congress has allowed it to expire. Just keep in mind there are income limitations, so check with your tax advisor about whether you qualify for this deduction.
Did you sell your home last year? If you made a profit, don’t forget that may you have to pay capital gains taxes on any profit. However, you can exclude $250,000 (or $500,000 if you’re a married couple) from your taxes.
And of course there is the mortgage interest tax deduction. Make sure you don’t claim too much for this deduction. You are allowed to deduct home acquisition debt up to $1 million, as well as $100,000 in home equity debt.
If your home is your primary place of business, then you could be eligible to deduct some of your home expenses, such as utilities and maintenance.
The country has suffered from a barrage of difficult weather conditions, so if disaster created property damage and destruction of your home, then you are able to deduct some losses (but be sure to carefully document your deductions with photos, receipts, and insurance claim reports). You should consult a tax adviser because filing for casualty losses can be complex, especially since your income and property value can impact the deduction, as well as depreciated values of items.