Tax Tips for Home Owners
With tax season upon us, here are some quick tips that could reduce your taxes this year. Don’t forget to check with a trusted tax adviser to make sure you qualify for each deduction.
- Mortgage Interest Deduction: Primary Home AND Second Home
- Must have a “Qualified Home”
- IRS defines Qualified as - “a main or second home that is a house, condominium, cooperative, mobile home, house trailer, boat (yes boat!) or similar property that has sleeping, cooking and toilet facilities.”
- Must have a property loan (purchase a home, second mortgage, a line of credit, or a home equity loan) secured by a mortgage, dead of trust, or contract for deed.
- Non-rented Second Home: treat this home as a qualified home (you don’t even need to visit this home in the tax year!)
- Rented Second Home: as long as you stayed for at least 14 days OR 10% of the number of days the property is rented out, it qualifies!
- Mortgage Interest Deduction: Rental Property
- Usually if you rent a property you will use the mortgage interest as an itemized deduction
- Closing Costs/Points Deduction
- These are costs paid when you purchase a property or refinance your mortgage.
- Third Party Fees Not Included, i.e. appraisal fees, recording fees, commission etc.
- Prepaid Interest can be deducted! i.e. origination fees, discount points, etc.
- Property Taxes
- State property taxes are deductible on your Federal Income Tax IF you itemize
- NOTE: The amount you are able to deduct will change in 2018.
- Mortgage Insurance Deductions
- Borrower-paid mortgage insurance premiums are tax deductible as an itemized deduction!
- Not deductible on second homes or rental property. Sorry!
- Capital Gain Exclusion
- If you made a profit from the sale of your main home you may be able to exclude that profit from your taxable income
- Individuals can exclude up to $250,000 from the sale of their main home as long as they have lived in that home for 2 of the last 5 years. Those years don’t even have to be consecutive.
- Exceptions to the two year rule (make sure you document these exceptions!)
- Change in Job Location
- Health Concerns
- Unforeseen Circumstances
Hopefully one of these tax tips will help you out this tax season!
DISCLAIMER!! I am not a tax professional. Make sure you check with your tax adviser to maximize your deductions!