With tax season upon us, many homeowners are looking for tax breaks. Depending on the situation, homeowners can deduct items like mortgage interest, PMI, and other expenses from their taxes. Here are some examples of 5 tax deductions for homeowners.
- Mortgage Interest
Mortgage interest is usually the most significant tax deduction for homeowners who itemize. A portion of every mortgage payment goes toward interest on the loan. Homeowners can deduct the interest they’ve paid up to a limit, which depends on when they took out the mortgage.
- Mortgage Insurance
Private mortgage insurance, or PMI, is another expense many homeowners should factor into their budget. PMI protects the lender if the homeowner cannot continue making payments on their mortgage. Homeowners can deduct their mortgage insurance payments on their itemized tax returns.
- Necessary Home Improvements
Homeowners may ask, "Do I get a tax break for all the money I've spent fixing up my house?" The answer depends on improvements made and how well expenses have been tracked. Necessary home improvements can qualify as tax deductions. However, not all home upgrades are considered essential. A few examples might include installing medical equipment, installing railings, or widening doorways for an accessible home.
- Home Office Expenses
Homeowners may deduct home office expenses if they are self-employed and use part of their home regularly and exclusively for conducting business.
Homeowners may use the IRS "simplified method" or track actual expenses to calculate the deduction for home office expenses. The IRS website provides details about determining whether the home office qualifies for a tax deduction and has worksheets for calculating the deduction amount.
- Property Taxes
Maine residents may be eligible for the Property Tax Fairness Credit Program. With this program, eligible Maine homeowners and taxpayers may receive a portion of the property tax paid during the tax year on the Maine individual income tax return.
These tax deductions may or may not apply to your situation. Always consult a tax professional before making any decisions regarding your taxes.
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For more information, contact KFS Mortgage Company today.