With April 15th only a few weeks away, the time has come to look at some of the available tax deductions for homeowners or for those who bought or sold a home in 2015.
In most instances you will need to itemize your taxes in order to qualify for the below tax deductions and credits.
If in doubt, talk with a tax attorney or certified public accountant (CPA) to ensure you can claim the deduction.
Home Ownership Tax Deductions
The following expenses can be eligible for a tax deduction:
- Your property taxes.
- The mortgage interest on your primary residence, as well as on a second residence. (There are limits, but relatively few taxpayers are affected.)
- The interest on up to $100,000 borrowed on a home equity loan or home equity line of credit, regardless of the reason for the loan.
- The premiums paid for Mortgage Insurance Premiums, but only for policies issued after 2006.
Additional Tax Benefits For Home Owners
Home Energy Credits - You may be entitled to a tax credit of up to 30% of the installation cost of geothermal heat pumps and solar/wind energy systems. Unless the laws change, these credits will expire at the end of 2016.
Home Improvements - Improvements required for medical care.
Home Office Deductions - If the space, up to 300 square feet, is regularly and exclusively used for business purposes.
Deductions not allowed for a personal (primary) residence:
- Dues to a homeowners association
- Insurance on your home
- Appraisal fees for your home
- The cost of improvements to your home, except in the relatively rare case where they qualify as a medical expense.
Deductions on the Purchase of Your Home
If you purchased your home in 2015, these are some costs that can be deductible:
- Interest paid at the time of purchase (the charge at closing would normally be done for interest up to the date of first payment.),
- Real estate taxes charged to you,
- Points - sometimes called origination fees and expressed as a percentage of the amount borrowed.
- Private Mortgage Insurance costs but, if prepaid, only the amount allocable to this year based on an 84-month amortization.
Title fees, real estate commissions, appraisal costs, home inspections, documentary stamps, credit report costs, costs of an abstract, transfer taxes, flood certificate, attorney fees, etc. are not deductible, but are added to the cost of the property.
Deductions on the Sale of Your Home
If you sold your home in 2015, these are some costs that can be deductible:
- Capital Gains - Real estate capital gains are the profits made in the sale of your home. Basically the sales price minus the purchase price plus any improvements made minus any depreciation, which applies to both individuals (up to $250,000) and couples (up to $500,000) when they sell their home.
There are special provisions for both active duty military and those whose spouse died during the tax year.
- Moving Costs - If you are moving because of a new job or taking another position with your current employer in another locale (at least 50 miles further away from your home than your previous job was), you may be entitled to moving cost tax deductions.
- You are able to deduct mortgage interest, points paid, and real estate property taxes you paid during the closing.
Items such as advertising costs, attorney and Realtor fees, escrow and title services, administration fees, and many other closing costs are not permissible deductions (they may be allowable for the new buyer though).
Important: Use Trusted Professionals for Advice
Always consult with a tax professional before finalizing your annual tax filings to make sure your homeowner deductions are done properly. If unsure who to contact, please give me a call and I can provide a listing of resources for you to contact to get further information and help.