Tax Breaks For Homeowners
If death and taxes are two things you can always count on in life, there should probably be a third: the slew of tax breaks offered every year to encourage more Americans to buy a home.
Owning a home is a pretty big deal, so the tax law provides several ways for your homeownership costs to cut your taxes. Certain expenses are deductible, provided you itemize deductions. Let’s take a look at some of these deductions.
What Homeowner Tax Deductions Am I Eligible For?
This is one of the most common tax breaks for homeowners, and applies to both your main home and a second home. The amount of qualified mortgage interest you paid in a year is typically reported on Form 1098, which is sent to the homeowner from the lender. To be eligible to deduct mortgage interest:
- You must have taken a loan to buy, build, or improve a home.
- The loan must also be secured, meaning that you signed a mortgage agreement, deed, or land contract for your main or second residence.
- The debt must be qualified acquisition debt or qualified home equity debt.
A “point” on a home mortgage is a payment that equals 1% of your total loan amount, and is paid up front to a lender to reduce your total interest rate. Unfortunately, you can only deduct the amount of any points paid in the year that you paid them — so if you’ve taken out a new home loan in the past year and paid points, don’t miss this tax break!
Real Estate Taxes
Real estate taxes can be deducted on Form 1040, Schedule A. To be deductible, real estate taxes must be assessed as a percentage of the value of the property. Additionally, the taxes must go into the taxing authority’s general fund.
Don’t forget to include any taxes you may have reimbursed the seller at closing. These are real estate taxes the seller had already paid before you took ownership. Your Form 1098 won’t include these taxes. Instead, that amount will be shown on the Closing Disclosure statement.
Self-employed? If you have a home office that meets IRS standards, there may be significant tax benefits for you. For example, if your home office represents 5% of your home’s total square footage, you may be eligible to deduct 5% off that property’s utilities, insurance, and property taxes. Just remember there are strict rules around what constitutes a home office with “regular and exclusive use” — so consult Publication 587 or your H&R Block Tax Pro to be sure you qualify for this deduction.
Do I Qualify?
The experts at H&R Block can look at your personal situation and help you identify the tax deductions you qualify for. And if you’d rather file your taxes yourself, know you are still backed by our 100% accuracy and maximum refund guarantees. In an office or online, don’t just get your taxes done. Get your taxes won with H&R Block.
Learn more about the H&R Block Budget Challenge, a yearly competition that gives away $3 million in scholarships and classroom grants.
Should you be filing your taxes as head of household, single or married? Learn how to determine your tax filing status and how it may affect your return.
Looking to find tax deductions? Review uncommon tax deductions to find out how a Tax Pro at H&R Block can help you identify ones that apply to you.
Wish you could file online and get an H&R Block tax pro to review your tax return? Learn more about our hassle-free online tax review service.