New Homeowner? You Have New Tax Deductions

financial calculationsIf you became a homeowner in 2015, you have some nice tax deductions headed your way when you go to file your return. Though buying was probably a nerve-wracking experience, your taxes will reap the benefit of you taking the leap into homeownership. You should ask your accountant or tax advisor about all the deductions you are entitled to, because tax laws very and some are more advantageous to your bottom line than others.

Here is a basic list of deductions to ask about just to get you started in the right direction:

Property Tax

One deduction available to you as a homeowner is for real estate property taxes you paid on your home during 2015, and this is filed on the Schedule A. Your mortgage provider typically sends out a tax statement that shows the amount of real estate property taxes you paid through the escrow account that they manage for you- funded through a portion of your monthly mortgage payments. The year-end statement should show the grand total for property taxes paid.

Mortgage Interest

Homeowners can take advantage of a mortgage interest deduction, which is claimed on the Schedule A. To get the mortgage interest deduction, your mortgage must be secured by your home. Interest you pay on a mortgage of up to $1 million, or $500,000 if you’re married filing separately, is deductible when you use a loan to buy, build, or make improvements to that specific home.

Prepaid Interest

Your lender should send you a Form 1098, which is used to document the points that you paid for your loan. If you did not receive this form, you can locate the dollar amount you paid on the HUD-1 settlement sheet, which you received when you closed on the purchase of your home.

Home mortgage interest and points are reported on Schedule A of IRS Form 1040.
Usually these prepaid interest (or points), which are something you paid at the time the mortgage was taken out are generally 100% deductible in the year you paid them.

PMI -Mortgage Insurance Premiums

If you itemize your return, you can deduct the cost of private mortgage insurance (PMI) as mortgage interest on Schedule A. Essentially, you can treat the amounts you paid during 2015 for qualified mortgage insurance as home mortgage interest when you file. The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006. Speak to you tax professional to determine if this applies to you.

Energy-Efficiency Updates to the Home

All of those improvements you made to your home in 2015 that provided for greater energy efficiency might qualify for the residential energy tax credit. The credit is filed on the IRS form 5695 with your tax return. Also note that this credit has a lifetime cap of $500 (less for some products), so if it is a deduction you have utilized previously, you’ll have to subtract prior tax credits from that $500 limit.

Here are a few energy improvements that may qualify you for the tax credit:

  • Insulation
  • Windows, doors, and skylights
  • Roofs (metal and asphalt)
  • Heating, ventilation, and air conditioning
  • Water heaters (non-solar)
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