For the most part, hurricane Florence passed by our area with very little storm impact. A few strong wind gusts and high surf caused minimal destruction to property and beaches. After the storm,
2012 Tax Breaks for Homeowners
It’s tax season! Zillow published a great article (http://www.zillowblog.com/2013-02-07/own-a-home-check-out-these-8-tax-breaks/) about possible tax deductions if you just purchased or sold a house! These are great tax breaks to keep in mind when you file your taxes, especially if you already itemize your taxes. Consider these deductions to see if they might benefit you.
Mortgage interest paid at settlement
If you just purchased a home using a mortgage you will definitely want to look into this deduction! On a mortgage of up to $1 million you can generally deduct your mortgage interest paid at settlement. You can find this information on your closing statement, but generally your lender statements are the most user-friendly. Depending on the type of mortgage and interest rate you have this could make a big difference on your tax return, especially if you are on the edge of a lower tax bracket. Keep in mind that you might be able to deduct other interest paid (Refer to your Form 1098 to see deductible interest: www.irs.gov/pub/irs-pdf/f1098.pdf.)
If you paid points associated with the purchase of a home take advantage of this tax break! In some cases you can deduct the amount paid for points in one tax year and in some cases it must be deducted over the life of the mortgage.
This deduction prevents you from double-paying taxes. You can deduct state and local property taxes as long as taxes are based on the assessed value of the real property. Just keep in mind that if you received any refunds on your property tax you can only claim a reduced deduction amount. You don’t want to double-pay taxes but you can’t get a double refund either!
If you sold a home in the past year, take a look at your selling costs as a possible deduction. These costs can include repairs, title insurance, advertising expenses and broker’s fees. The IRS allows the deduction of repair costs only if they were made specifically with the intent of improving your home’s marketability and were made within 90 days of the sale. The deduction comes out of your gain on the sale. Keep your receipts! If you want to deduct selling costs you must have all documentation that link expenses to the selling of your home.
If you use a portion of your home strictly for business use, you may be able to deduct costs related to insurance, repairs and depreciation. The rules and regulations are very detailed for this deduction but are generally profitable, especially if you are working full-time out of a home office. See this IRS publication for details: http://www.irs.gov/publications/p587/ar02.html#en_US_2012_publink1000226375.
Mortgage insurance premiums
“You may be able to deduct the premiums paid for private mortgage insurance for your principal residence and for a non-rental second home. The deduction begins to phase out once your adjusted gross income reaches $100,000 ($50,000 for married filing separately).”
This deduction varies greatly from person to person. If you think you might qualify, ask your tax advisor to provide rules for your specific location and circumstance.
Home improvement loan interest
If the loan was used for capital improvements, you may be able to deduct interest paid on a home improvement loan. Capital improvements change capacity, structure, size, or use of the property (not routine repairs, maintenance and updating). In private residences this most commonly applies to home additions.
Construction loan interest
“If you take out a construction loan to build a home, you may qualify to deduct the interest…It must either be your principal residence or a vacation home that you will use for personal purposes.”
Tax codes are often complicated. Be sure to verify all your deductions with a tax professional and refer to the IRS website for details on filing your taxes. Good luck and may the odds be ever in your favor!
Hank Johnson, a graduate of The Citadel, has a proven track record as a CFO, businessman, Entrepreneur and real estate investor. Hank has been active and successful in the Charleston community for ove....