You know that you can get an income tax deduction on the mortgage interest you pay. But there are other tax deductions you can take on your principal residence or second home -- such as property taxes.
The following can be eligible for a tax deduction:
- Your property taxes. Don’t forget to include any taxes you may have reimbursed the seller for. These are taxes the seller had already paid before you took ownership. You won't get a 1098 report listing these taxes. Instead, that amount will be shown on the settlement sheet.
- 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.
- Points that you paid when you purchased the house (or those that you convinced the seller to pay for you).
- The premiums paid for Private Mortgage Insurance (PMI), but only for policies issued after 2006. Unless Congress renews this deduction, 2014 is the last year it can be claimed. (The right to this deduction disappears as your Adjusted Gross Income rises from $100,000 to $109,000 (or $50,000 to $54,500 for those who use married filing separately status.)
- Home improvements required for medical care.
How much can I save?
The actual amount of money you save on your annual income tax bill depends on a variety of factors:
- Your filing status (single, head of household, married filing jointly, married filing separately)
- Your standard deduction amount
- Your other itemized deductions
- Your taxable income
Your home-related itemized deductions, plus your other itemized deductions must add up to more than the standard deduction or they won't save you any money.
What can't I deduct?
You can't deduct the following payments for a personal 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. (But keep those receipts. They may help reduce your taxes when you sell your home.)
Get every deduction
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