Don't Forget: Top Homeowner Tax Deductions!

1. Mortgage Interest. Perhaps the biggest tax break is reflected in the house payment you make each month. For most homeowners, the bulk of that payment goes towards interest. All interest is deductible, unless your loan is more than $1 million.
2. Private Mortgage Insurance. If your lender required you to buy PMI (private mortgage insurance, which is often required when the loan is more than 80% of the home’s purchase price,) the PMI premiums are tax-deductable for mortgages taken out in 2007 thru 2010. Keep in mind the account of the deduction depends on your income—if you earn more than $100,000 a year, the deduction phases out.
3. Points. Your lender will often charge you a variety of fees, one of which is called "points." (One point is equal to 1% of the loan principal.) One to three points are common on home loans, which can easily add up to thousands of dollars. You can fully deduct points associated with a home purchase mortgage. Refinanced mortgage points are also deductible, but only over the life of the loan, not all at once.
4. Equity Loan Interest. You may be able to deduct some of the interest you pay on a home equity loan or line of credit—if you have one. However, the IRS places a limit on the amount of debt you can treat as "home equity" for this deduction.
5. Home Improvement Loan Interest. If you take out a loan to make substantial home improvements, you can deduct the interest, with no dollar limit. However, the work must be a "capital improvement" rather than ordinary repairs. Qualifying capital improvements are those that increase your home's value, prolong its life, or adapt it to new uses. For example, qualifying improvements might include adding a new roof, fence, swimming pool, garage, porch, built-in appliances, insulation, heating/cooling systems, landscaping, or more.
6. Property Taxes. Property taxes are fully deductible from your income.
7. Home Office Deduction. If you use a portion of your home exclusively for business purposes, you may be able to deduct home costs related to that portion, such as a percentage of your insurance and repair costs.
8. Selling Costs. If you decide to sell your home, you'll be able to reduce your taxable capital gain by the amount of your selling costs. These include real estate broker's commissions, title insurance, legal fees, advertising costs, administrative costs, and inspections. In addition, the IRS recognizes that costs ordinarily attributed to decorating or repairs -- painting, wallpapering, planting flowers, maintenance, and the like -- are also selling costs if you complete them within 90 days of your sale and with the intention of making the home more saleable.
9. Capital Gains Exclusion. If you have owned and occupied your principal residence for at least two of the past five years, you can earn up to $500,000 on the sale of your home and pay no federal income tax whatsoever. (That’s if you’re married.) If you’re single, you can get up to $250,000 tax free. And you can do this as often as you want for every two years for the rest of your life.
10. Moving Costs. If you move because you got a new job, you may be able to deduct some of your moving costs. To qualify for these deductions you must meet several IRS requirements, including that your new job must be at least 50 miles farther from your old home than your old job was. Moving cost deductions can include travel or transportation costs, expenses for lodging, and fees for storing your household goods.

We hope you find this information helpful. We compiled this list from a variety of reliable sources, including Nolo, the nation’s oldest provider of legal information, Bankrate.com, and Realtor.com. As always, confirm all tax deductions with your accountant. Thanks for reading!

Christine Van Tuyl
Prudential California Realty
Coronado, CA 92118
http://www.coronadoislandhomes.com