As many Americans scramble to finish their taxes by the dreaded deadline, April 16, 2012 (since April 15, 2012, falls on a Sunday), let’s review the basics of home ownership and improvements as they may or may not relate to your tax filings this year.
One of the major and best known benefits of home ownership is the mortgage interest tax deduction. You can deduct any mortgage interest paid on your primary residence if you itemize your return. You should have received a form 1098 form your lender with this documentation. You can also deduct any points paid, but this can be complex if you refinanced your home. In that case, seek advice from a tax professional.
Property taxes are also deductible and should appear on your 1098 form if paid through your lender. Additionally, Private Mortgage Insurance (PMI) is deductible, as long as your household income falls below $100,000 for those married filing jointly or $50,000 for individuals.
Typical home improvements are not tax deductible unless you are using your home as part of a business, investment property or home office. But the Energy Efficient Tax Credit (see IRS Form 5695 for more information) allows homeowners up to $1,500 in tax credits for energy efficient installations such as windows, doors, heat pump, insulation, and more. More information is also available online at the Alliance to Save Energy web site. Save all receipts and documentation of the date of installation. Many sources are not optimistic that Congress will extend these energy efficient tax credits into 2012, so do your homework before investing in any home improvements this year.
This information does not consitute tax advice. Please consult a tax professional or call the IRS help line at (800) 829-1040 to verify before filing your taxes.