Tax Season Is Here: What New Home Owners Should Know
March 7, 2013
Owning a home has many tax benefits and talking with an accountant or a tax specialist will help you unravel the mysteries and maximize your tax advantages. In general here are some of the advantages of home ownership from a tax standpoint, but for more detailed information talk with a tax professional. Offset Exemptions - The benefits do not just take place in April when the return comes in. Owning a home can actually allow a homeowner to offset exemptions and have more take home pay throughout the year. Take Advantage of Mortgage Deductions - According to research by USA Today based on data from the IRS, only 26% of Americans take advantage of deducting the interest paid on their mortgage over the course of the year. The average deduction can save homeowners more than $12,000 per year in some states. See IRS publication 936. Itemized Deduction Change - This is the biggest change for homeowners. In past years where standardized deductions may have applied, now Schedule A will be used to itemize deductions such as mortgage interest, property taxes, points paid on a home loan, mortgage insurance, and charitable donations. (Check with your tax representative for more information) As of January 1, 2012 mortgage insurance premium deductions and home energy improvement credits were allowed to expire along with 57 other tax code benefits. These two tax benefits were restored for homeowners when the American Tax Relief Act of 2012 was signed into law January 1, 2013 by the president. Mortgage Insurance Premiums Deduction - Often lenders require insurance if the mortgage covers more than 78% of the home's value, but this insurance is deductible and remains deductible through the tax relief act. Home Improvement Credit for Energy Efficiency - If improvements are made on the home to increase energy efficiency such as new energy efficient windows, insulation, roof, water heater, or heating and cooling systems, then homeowners can receive 10% of the cost up to $500 in tax credits. It's important to talk with a tax specialist and make sure you are receiving all the exemptions and benefits of being a homeowner.