As income tax rolls around each year, it is important to take a look at any new tax laws that are relevant to home ownership. There are many home related expenses that can be deducted from your income taxes. Although each deduction makes your tax return more complicated, do not let that stop you from taking advantage of home owner tax perks all of which require completing the 1040 long form.
Here is a quick look at some of the expenses and tax perks that any home owners should be aware of and look in to. It is very important to know the guidelines for each of these deductions or credits. All of these guidelines can be found on the IRS website.
*Mortgage interest - the bulk of the monthly mortgage payment is for the interest on the loan. This is especially true for a 30 year or more mortgage. This interest is tax deductible. Home equity loans and lines of credit are also deductible.
*Mortgage interest on second homes - this is also tax deductible but be very careful with this one. If you spend less than 14 days at your second home, it can be considered a rental property for which you will owe taxes.
*Points on a mortgage - if you paid points for a better rate, this may be tax deductible in the year you purchased the home. Points paid on a refinance loan may be tax deductible over the life of loan.
*Property taxes are tax deductible.
*Energy tax credit limited to $500.
*First time home buyer tax credit - think of this is more like an interest free loan. This credit must be paid back within 15 years although payments are limited to $500 per year. Repayment does not begin until 2011.
This is just a short synopsis of what is available for this year's income tax return. It is vital that anyone who takes advantage of these deductions follow the guidelines as set forth by the IRS. Since many of these can be quite complicated, it is sometimes easier to seek a professional to do income taxes. They are usually up to date with the current laws and guidelines and also have the computer software which is compatible to current tax standards.