Tax season is here once again, and many of us are hoping for a large refund. One way to maximize your refund is to understand the deductions you can take. If you are a homeowner, there are several tax benefits you can take advantage of to help recoup some of your tax burden. Being a homeowner usually means you can itemize deductions which gives you a larger deduction than the “standard deduction”.
Below are four items that many homeowners can deduct:
Interest Paid
One of the greatest benefits to homeowners is that most people are able to claim all of the interest paid on their mortgage on their primary residence. There are some limitations on larger amounts, home equity loans and second homes that apply to some people, but generally for most people all mortgage interest is tax deductible.
How do you find out how much interest you paid? At the beginning of the year, you will receive a statement called a 1098 that shows the amount of interest paid.
Real Estate Taxes
Real estate, or property taxes, paid either through an escrow account or directly to your local government are generally tax deductible. The amount paid will be on the 1098 statement. If you paid the local government’s office directly, you should have received a paid receipt.
Private Mortgage Insurance (PMI)
If you purchased or refinanced your home after January 1, 2007, pay PMI and your adjusted gross income is less than $110,000 per year, you may benefit from a tax deduction. This tax benefit is only available through 2010, so be sure to take advantage of this deduction if it applies to you.
New Mortgage
If you took out a new mortgage during the year, any points paid generally are tax deductible as well. The way they are deducted may vary depending on whether you were purchasing a home or refinancing an existing mortgage. These also are on the 1098 form and may also be found on the HUD-1 Settlement Statement you received when you closed on your mortgage.
Homeownership can offer many financial benefits during tax time, so speak with your tax advisor to ensure you take advantage of all the opportunities that may be available to you.
