There are several tax deductions available for homeowners in 2013. These tax deductions are important to understand since they can increase the deduction amount on the tax return by a large amount. The annual standard tax deduction for individuals is $6,100 and for married couples it is $12,200 in 2013. Owning a home can help increase deductions. The biggest and most important tax breaks every homeowner needs to know about are mortgage interest, mortgage insurance, energy credits, debt cancellation, profit from sale and property tax.
Mortgage Interest, Mortgage Insurance, Points and Property Tax
One of the most common deductions each year is claiming mortgage interest, which can be deducted up to the price of one million dollars. This deduction saves homeowners over one hundred million dollars a year in taxes. You can find your mortgage interest paid for the year on your 1098 form that is mailed out in January of the year.
For buyers who purchased home with less than 20% down, the lenders usually requires private mortgage insurance, also known as PMI. The amount homeowner pays in PMI is tax deductible. 2013 may be the last year for this deduction, unless extended by the government.
If you purchase a home in 2013, you may have pay “points” to the lender in your mortgage package. The points are deductible. The amount can be found on your settlement statement.
Your property tax. The amount of property tax able to be deducted should be the exact amount paid to the local city or county, and should not include city fees. Don’t forget to include any taxes you may have reimbursed the seller for. The reimbursement can be found on your settlement statement.
As a general rule, you can deduct interest on up to $100,000 of home equity debt as mortgage interest.
Going green helps save money during tax season. Energy efficient heaters, windows, doors and insulation can be claimed as building materials for a maximum deduction of five hundred dollars. Installing and using solar panels on a primary residence is a separate deduction, which means even more money in the tax return.
Cancellation of debt is important to claim on taxes since it can result in large fines and changes an individual’s tax liability. The cancelled debt amount can be claimed on taxes by the lendee in the event of a foreclosure or other mortgage reconstruction. This tax deduction may not be renewed by Congress, which is required to make a decision on the matter in 2014.
Profit from Sale
Another major benefit of owning a home is that the tax law allows you to shelter a large amount of profit from tax. If you are single and owned and lived in your home for at least two of the five years before the sale, then two hundred fifty thousand of the profit is tax free. Married couples can claim up to five hundred thousand dollars. Moving expenses can also be deducted if the new property is more than fifty miles from the previous property. Making improvements and repairs to a selling property for increase marketability can also be deducted since improvements raise the cost of a property.
There are many different tax deductions for homeowners in 2013, the one listed above are just some of the important ones. You should always consult your tax professional for the latest changes and rules as some items may be been expired and not be renewed by the government.