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homeowner tax credit

Don’t Forget These Homeowner Tax Credits & Deductions

No one looks forward to tax season. However, as a homeowner who likely holds a home mortgage loan, this time of year should be looked upon positively. Tax time represents an opportunity for you to recoup some of the expenses associated with owning your home through homeowner tax credits and deductions established by the Internal Revenue Service—among other avenues.

There are a number of homeowner tax credits and deductions Uncle Sam affords every homeowner with a mortgage. However, in order to reap the benefits of these credits and deductions you will need to take an itemized approach to your taxes. Word of caution, if you decide to itemize you cannot take the standard deduction, according to the IRS guidelines.

While this approach will undoubtedly involve more effort, the end result could be more money in your pocket after tax time.

Homeowner Tax Deductions

If you took out a mortgage loan to finance the purchase of your home, then you more than likely have to make monthly mortgage payments. Included within these house payments are several costs that you are able to deduct. The following are three of the most common homeowner tax deductions:

  • Real estate taxes — An annual tax most state and local governments charge on the value of real property. The IRS says you can deduct the tax if “it is assessed uniformly at a like rate on all real property throughout the community” and the “proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to you.”
  • Home mortgage interest — As you likely already know, the mortgage payment you make each month includes interest paid to the lender. This interest can be deducted as part of your tax return so long as you itemize your deductions on Schedule A (Form 1040). Typically you can find the interest paid to your lender on a 1098 form—which is sent out annually in January.
  • Interest from a home improvement loan: If you made improvements to your property, you cannot write off the cost of home improvement. You can however write off the interest if you took out a home loan to pay for improvements to your property.

For further detail on the above deductions, make sure you check out the IRS website.

Homeowner Tax Credits

If you’re the type of homeowner who appreciates the greener things in life, then there are a variety of homeowner tax credits to be considered during tax season. The following are some of the most common:

  • Energy-efficiency tax credit —If you installed energy efficient equipment during the previous tax year, the IRS will most likely grant you a $500 tax credit. The credit is set to expire by the end of 2016. Energy efficient equipment includes:
    • Storm doors
    • Energy efficient windows
    • Insulation
    • Air-conditioning
    • Heating Systems
  • Renewable-energy tax credit: Homeowners who use renewable sources of energy to power their homes get rewarded, each year, around tax time. If you installed equipment, such as solar panels or wind turbines, to help power your home, you may be eligible for the Renewable Energy Efficiency Property Credit—which grants homeowners a credit up to 30% of the cost of the equipment, installation included. There is fine print however. The equipment must be placed in service by the end of December 2016.

Be sure to check with your home state to see if there are any other state specific credits available to you as a homeowner.

Don’t Tackle Tax Time on Your Own

Homeowner tax credits and deductions come with a variety of conditions attached . Some are set to expire, and others are constantly being re-evaluated. Remember, just because you read it on the Internet doesn’t always make it true or current.

At Blue Water Mortgage, we can help set you up with a qualified tax preparer who can explain all the in’s and out’s of owning a home and how it will impact you during tax season. Our seasoned mortgage brokers have worked with numerous homebuyers to understand the tax implications of buying and owning a home. Contact us today for any questions you have this tax season.

Roger is an owner and licensed Loan Officer at the Blue Water Mortgage office in Hampton, NH. Roger graduated from the University of New Hampshire Whittemore School of Business and has been in the mortgage industry for over 20 years. Roger has originated over 2500 residential loans and is licensed in New Hampshire, Massachusetts, Maine, Connecticut and Florida.