Tax season has crept up on us once again...if you own a home there are tax credits and deductions available to provide you some financial relief. You'll be looking for Form 1040 Schedule A if you are able to make itemized deductions; a Read on to find a list of tax breaks to take advantage of this year.
1. Mortgage Interest. A large chunk of each monthly mortgage payment goes toward paying down interest on the loan. Luckily, that amount is fully deductible -- unless your mortgage is more more than $1 million. Even if you've re-financed or own a second home, the interest you pay is deductible. You are even allowed to rent the second home for a portion of the year and deduct the interest expense so long as you personally live on premises for at least 2 weeks of the year. Side note: Do not forget to claim the rental income if you do choose to lease out your second home.
2. Mortgage Points. If you paid points (pre-paid interest) to reduce your overall mortgage payments, you can recoup that money in the form of a tax break. You may deduct those points paid when you purchased or re-financed from the taxes filed the same year that the points were paid.
3. Property Taxes. A portion of your monthly mortgage payment is put in a holding account for property taxes. This amount will be included on the annual statement your lender will send to you at the end of the year. If this is your first year in your home, you'll need to find the pro-rated tax amount on your Settlement Statement given to you at closing. Side note: Property taxes must be deducted as an itemized expense on Schedule A.
Please note that these are general guidelines. We suggest you speak with a tax specialist about your specific case to ensure you file correctly and receive the largest possible refund.