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Tax Breaks for Homeowners

January 13, 2012

It is never too early to start preparing for your taxes and here is a reminder of some of the rewards of homeownership!

(NOTE: IRS Publication 530 offers a more nuanced view into Tax Information for Homeowners):

1. Mortgage interest deduction. Assuming this home is your personal residence, 100 percent of the mortgage interest you owe and pay before Dec. 31, 2011, is deductible on your 2011 taxes. In January, your mortgage lender will send you a form documenting the precise amount of interest you paid, although most lenders also now make this form immediately available to borrowers online.   Chances are good that you paid some amount of advance interest on your home loan at closing — expect to see that on your statement from your lender, but you should also be able to find it on the HUD-1 settlement statement you received from your escrow agent at closing.

2. Property tax deductions. Again, assuming that this is the home you live in most of the time, you should be able to deduct 100 percent of the property taxes you’ve paid to your state and/or local taxing agency this year.

3. Closing-cost deductions. Discount points and origination fees paid to your mortgage lender and/or broker at closing are frequently deductible, but there are rules around this, which tax software and/or professionals can help you make sure you meet. Note that, according to Internal Revenue Service Publication 530, “You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home.”

4. Home improvements. There are various improvements especially those that increase your home’s energy efficiency that may be eligible for tax credits.

If you currently own property be sure to consult with an experienced tax professional or use reputable tax preparation software to ensure that you get the maximum tax advantages available to you as a homeowner. 

If you don’t currently own property you might find it beneficial for a tax professional to show you how you might reduce your tax liabilities by owning.  And of course for the house hunting part, contact me!

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