8 Great Tax Deductions & Credits for Home Owners

The tax filing deadline is soon approaching. If you are homeowner then make sure you take into account these eight tax deductions and credits. You could make some great savings if you qualify for the tax deductions or credits.

Tax Deductions for Homeowners

Home Owner Tax Deductions & Credits

1. Property Tax
The property tax can be deducted as long as you fulfill the conditions specified by the IRS. Here are a few to consider:

Document: Schedule A (Form 1040)

2. Mortgage Interest
The interest you pay on a loan to secure a home is tax deductible. The loan could come in the form of a mortgage, a 2nd mortgage, a line of credit, or a home equity loan. If your loan fulfills one or more of the following conditions then you can generally deduct all of the interest paid during the year. Read part 2 of IRS publication 936 if you don’t fulfill any of these conditions.

Document: Schedule A (Form 1040)

3. Mortgage Points
Mortgage points come in two forms: origination points and discount points. Each point equals 1% of the total amount mortgaged. Form 1098 shows how much you paid for the mortgage points in the previous year. Points can be deducted as long as they fulfill the requirements set by the IRS. Here are a few to consider:

Document: Schedule A (Form 1040)

4. Residential Energy Tax Credit
Tax credits of up to $500 are offered to homeowners who make an effort to make their home more energy-efficient. Residential Energy Tax Credits can change every year so check out the ENERGY STAR site to see the latest list on offer. Here are a few examples of qualified categories for 2016 tax returns.

Document: Form 5695

5. Renewable Energy Tax Credit
Tax credits are also offered to homeowners who make an effort to utilize renewable energy. Homeowners are eligible for up to 30% of costs spent on putting the system in place. Categories that qualify for 2016 tax returns include:

Document: Form 5695

Note: Unfortunately, most of the above tax credits expired on Jan 1, 2017. Check ENERGYSTAR.gov to see if you qualify for any credits for upcoming tax years.

6. Home Office Deduction
Spend a lot of time running a business at home? You might be able to deduct expenses for the business use of your home. There are two important requirements that need to be fulfilled in order to qualify for home office deduction.

Document: Form 8829

Tax Deductions for Selling Homes

Here is a list of items that might tax deductible if you sold a home in the past year.

7. Selling Costs
You may be able to deduct your income taxes by taking into account any expenses associated with the home selling process. Examples include: home repair fees, advertising expenses, and real estate broker commissions. You can only deduct repair fees if the repairs were made within 90 days before closing a sale.

Document: Worksheet in Publication 523

8. Home Sale Exclusion
You might be able to exclude profits gained from the sale of your primary home. To qualify, you need to have owned the home for at least two years and to have lived in that home as your main residence for at least two years. Those who qualify could exclude up to $250,000 of the profit (up to $500,000 for joint returns).

Document: Worksheet in Publication 523

Home Owner Fees that Aren’t Tax Deductible

We aren’t done yet. Here is a list of common house ownership expenses that aren’t tax deductible. Unique conditions, however, may apply.

Note: home renovation costs may be tax deductible if the mortgage you take out to buy a home includes money to be spent on renovations and improvements. It may also be deductible if the improvements qualify as medical expenses.