With stores already stocking their shelves with holiday supplies, it’s not too early to be reminded that tax season is also just around the corner. Buying a home or being a homeowner means you can benefit from a number of ongoing and temporary tax deductions. Before you get caught up in the flurry of end-of-year purchases and celebrations, it’s a good idea to set aside some time to consider whether you qualify for any of these home-related 2010 tax breaks outlined by the Internal Revenue Service:
Evergreen Tax Breaks For Your Home
If you own your home, you can take certain tax deductions every year. Here are some of the common tax deductions available to homeowners:
- Mortgage Interest Deduction: For those married filing jointly, it is possible to get a tax deduction on interest payments on up to $1 million in mortgage debt secured by your first or second home. (Those filing separately get a deduction for up to $500,0000 of mortgage debt.) The only exception is if you pay in cash for your house, and then take an equity loan out using the home as collateral.
- Mortgage Tax Credit: Certain low-income first-time homebuyers can get a tax credit for up to 20% of mortgage interest payments. Special conditions apply, however, and you need to be approved through your state or local government first.
- Points: If you pay points on your home loan, the amount is deductible. You can deduct points all at once on a home purchase mortgage, and you can amortize refinance points over the life of the loan.
- Home Improvement Interest Deduction: You can deduct the interest you pay on a home improvement loan made for a “capital improvement” (but not for repairs). Your home improvement must increase the home’s value, adapt the home to new uses, or prolong the home’s life if you want the interest deduction.
- Property Tax Deduction: If you pay property taxes, you can deduct them from your income.
- Selling Costs Deduction: You can deduct selling costs related to your home. These costs include legal fees, advertising costs, commissions, and inspection fees.
- Home Office Deductions: There are a number of deductions that you might be eligible for if you have a space in your home dedicated to business.
2010 Tax Breaks For Your Home
There are some tax credits that will expire at the end of 2010. If you qualify, you only have a limited time to benefit from the following tax breaks:
- PMI: Your private mortgage insurance premiums are tax deductible through the end of 2010. This deduction phases out as your income rises, though.
- Homebuyer Tax Credit: This applies if you bought your home before the end of April, and if you finalized all the paperwork by September 30. You can claim a tax credit of up to $8,000 if this is your first home or up to $6,500 if it’s not your first purchased home – as long as certain conditions are met.
- Small Green Home Improvement Tax Credit: If you have made (or are planning on making) some small green home improvements, you can get a tax credit for up to 30% of the cost, up to $1,500. These small green home improvements included duct seals, replacement windows, certain types of insulation, water heaters, high efficiency heating and cooling systems, and energy efficient doors.
- Large Green Home Improvement Tax Credit: For larger energy efficiency projects, you can get a tax credit of 30% of the cost of the improvements, with no cap on the dollar amount. Eligible systems include wind, geothermal, and solar power/heating systems.
Taxes and Your Home: Figuring the Benefits
Home ownership does come with some tax advantages. Before you benefit from any tax breaks, though, it is a good idea to consult with a knowledgeable tax professional or visit irs.gov for more information. This way, you can learn more about qualifying for tax breaks and get additional information on which tax breaks are phasing out. You can also learn more at the LendingTree website about tax benefits to owning a home.
Photo: KOMUNews, Creative Commons 2.0
Miranda Marquit is a journalistically trained freelance writer and professional blogger. She contributes to several personal finance web sites, writing on topics such as budgeting, home loans and mortgages, and investing.