Buying a home – particularly your first home – can be intimidating. Plunking down thousands of dollars for a downpayment is not to be taken lightly.
To many Americans, navigating the labyrinth of potential tax deductions and credits can feel like yet another burden of homeownership. But the good news is that with a little knowledge and the right documents to back you up, tax time can quickly move from being a chore to being a satisfying payday thanks to benefits and deductions on your annual return.
So how can you get the most out of your home this tax time? Here are seven important items for homeowners to note so they can unlock the biggest possible return.
- PMI deduction survives – Thankfully for homeowners, legislators passed a package in December to extend a number of tax breaks – including one for Personal Mortgage Insurance (PMI).
- Mortgage interest – This tax break alone opens the door for many taxpayers to itemize other, smaller breaks instead of settling for the standard deduction. Simply use Form 1098 if you have paid more than $600 in mortgage interest in the tax year.
- Local real estate taxes – Many taxpayers overlook the fact that homeowners can deduct local, state and even foreign real estate taxes on their federal returns. There also may be special property tax benefits for lower-income homeowners based on your state or municipality of residence, so look into further breaks specific to your community.
- Losses by weather, fire or theft – While obviously nobody wants a tree to fall on his house or for burglars to make off with his flat-screen TV, the IRS grants a break to any property or casualty loss that is more than 10 percent of your gross income and is not reimbursed by your insurance. Just remember that documentation is key, both to prove values and the circumstances of what was lost.
- Renovations cut taxes at sale time – Though the majority of renovations you make on your home are not tax-deductible, that doesn’t mean you should simply throw out your documents – particularly if you’re in a hot real estate market or have an expensive property.
- Selling costs count too – For those who sold a home in 2014, the commission paid to a real estate agent to sell your home is tax-deductible, as are any legal fees and closing costs.
- Don’t forget moving expenses – If you moved more than 50 miles for a new job, you might be able to deduct moving expenses. And for the record, you must not only meet a distance test but also a time test.
For detailed information on the above mentioned hints, click this link: http://www.floridarealtors.org/NewsAndEvents/article.cfm?p=3&id=321665