Tax Benefits for Homeowners
June 10, 2024
What tax deductions, programs and housing allowances are available and unavailable to you, homeowner? Let's delve into several that the IRS wants you to consider:
- Deductible house-related expenses — your mortgage may bundle other costs involved in owning a home. Here are some to deduct:
- State and local real estate taxes, which are subject to a $10,000 limit
- Home mortgage interest, within the allowed limits
- Deductible homeownership expenses
- Nondeductible homeownership expenses:
- Fire and comprehensive insurance coverage
- Title insurance
- The amount applied to reduce the principal of your mortgage
- Wages paid to domestic help<depreciation< span=""></depreciation<>
- The cost of utilities (gas, electricity, water)
- Most settlement or closing costs
- Forfeited deposits, down payments or earnest money
- Internet or Wi-Fi system or service
- Homeowner association fees, condominium association fees or common charges
- Home repairs
Help is available
On the positive side, there's mortgage interest credit, which helps people with lower income afford homeownership. If you or someone you know qualifies, the credit can be claimed each year for part of the home mortgage interest paid. What does eligibility look like? A homeowner is issued a qualified Mortgage Credit Certificate from a state or local government, which is issued only for a new mortgage to purchase one's main home.
A ministers and military tax break exists as well. Ministers and members of the uniformed services who receive a nontaxable housing allowance can deduct real estate taxes and mortgage interest. That is, the allowances don't reduce the deductions.
Knowing what expenses you can deduct — and records you should keep — will help you when you file Form 1040 and itemize. Keeping full and accurate records is vital to properly report your expenses to support your deductions and credits, including your purchase contract and settlement papers when you bought the property. Keep any receipts, canceled checks and similar evidence for improvements or other additions so they are available to the IRS. For how long? For as long as you own the property and even after you dispose of it for the period of limitations that applies to you.
If you have questions about any of this, go to IRS.gov to find resources to help you and/or consult with a qualified tax preparer.
Source: Industry Newsletters ©2024
