If you decide to itemize your taxes like I did, there are some great deductions you can take when you own your home. You probably already know you can deduct your mortgage interest, but what are some other items you can deduct? I don’t know about you, but I can use all the deductions I can get.
(Hint: If you use H&R Block At Home like I did, you’re already on top of these deductions)
Homeowners CAN deduct:
Late payment charges and pre-payment penalties are eligible to be deducted from your taxes so long as they were not for a specific service received in connection with your home loan.
Property taxes paid during the year
You can also deduct any property taxes you reimbursed to the seller at closing. These are the funds the seller had already paid into escrow before you took ownership. This amount will be on your mortgage settlement sheet but you won’t get a 1098.
Mortgage interest on a second home
The mortgage interest on a second residence is also deductible within limits.
Interest on an equity loan
The interest on $100,000 (or less) borrowed on a home equity loan or home equity line of credit, regardless of the reason for the loan, is also deductible.
If you paid mortgage points when you purchased your home, those are also deductible, but if you refinanced, you have to spread that deduction over the life of the loan .
Private Mortgage Insurance (PMI)
You can deduct PMI in 2009, but only for policies dated after 2006. (The right to this deduction disappears as Adjusted Gross Income rises from $100,000 to $110,000 (or $50,000 to $55,000 for those who use married filing separately status.)
Home improvements required for medical care
If you had to make changes to your home for medical care, such as installing a wheelchair ramp or making a doorway wide enough to accommodate your wheelchair, those expenses could also be deductible.
Homeowners CANNOT deduct
Premiums paid for your homeowners insurance is not deductible on your federal taxes.
Homeowner’s Association Dues
Yeah, they’re expensive and sometimes you wonder how they’re spent, but HOA dues are not deductible.
Maintenance and repairs
Maintenance items like lawn care, pressure cleaning, carpet cleaning, maid services, or HVAC maintenance are not deductible. Repairs are not deductible either.
Improvements you make to your home are not deductible now, but if you save those receipts for improvement expenses, you can deduct them from the profit you make from selling your home.
If you had your home appraised, those expenses are not deductible.
As always, be sure and verify the deductibility of all your expenses with a qualified tax advisor.
Photo by R. Clock