If you purchased your first home last year, you’ve got until April 17 to take advantage of homeowner deductions. If you’ve bought, or are buying this year, now is a good time to research what tax benefits you’ll be eligible to receive next year.
The most common deduction is the mortgage interest deduction. That deduction, for which you use Schedule A, is for interest you pay on a mortgage of up to $1 million — or $500,000 if you’re married filing separately, says the National Association of Realtors. Adding another mortgage, such as a second mortgage, home equity loan, or home equity line of credit counts toward the $1 million limit.
Home ownership also offers a prepaid interest deduction, which is a deduction for the points paid by the buyer when taking out the mortgage. That deduction is usually 100 percent deductible the year it was paid. Your lending institution should send you a Form 1098 that lists the points you paid, or find the amount listed on the HUD-1 settlement sheet you obtained on closing or refinancing.
You can also deduct the property taxes you paid on your home the previous year, on Schedule A. If your mortgage has an escrow account, that amount will be listed on your annual statement. Additionally, if you bought a house this year, check your HUD-1 settlement statement to see if you paid any property taxes at closing. Those taxes are also deductible on Schedule A, adds NAR.
You can also deduct the cost of private mortgage insurance (PMI) as mortgage interest on Schedule A if you itemize your taxes.
If you installed the following energy-efficient systems in 2016 they will get you tax credits on IRS Form 5695, says NAR.
Cindy, Lara & Leslie Heckelsberg
The Heckelsberg Team
Coldwell Banker The Real Estate Group
2725 Us Route 34 Oswego, IL
Cindy Heckelsberg 630-253-2997
Lara Heckelsberg Gawrych 630-253-2995
Leslie Heckelsberg 630-253-2990