6 Home Tax Deductions to Take

There are a number of home tax deductions allowed under the law, and if you use these deductions properly, you will be able to save a good deal of money on your taxes. Below are some of the home deductions that you should take if you want to save money. 

Home Mortgage Interest

Home mortgage interest is a tax deductible, so if you are currently amortizing your home, compute the amount of interest that you pay on your mortgage and deduct this amount from the value of your taxable assets. If you are married and you and your spouse are filing your returns jointly, you may deduct the entire amount of home mortgage interest on your return, but if you and your spouse are filing separately, you should split the amount between the two of you. This means that you can claim only 50 percent of the amount of the home mortgage interest. Moreover, you can claim as deductions only the interest of a home mortgage not exceeding $1 million. In addition, if you paid for your home in cash and later on used the property as loan security, you cannot claim the interest of the loan secured by property as tax deductible.

Loan Interest on Money Used for Home Improvement

If you just made some home improvements and took out a loan to pay for them, you can deduct the amount of interest of such a loan from your taxes. However, not all types of home improvements quality for loan interest exemptions. In fact, only those improvements considered “capital improvements” qualify for such deductions. Capital improvements include repairs and improvements that prolong the useful life or increase the value of the property. As a general rule, simple repairs such as the patching of holes and leaks, repainting, and plastering walls do not qualify as “capital improvements.”

Real Estate Taxes

Real estate taxes or property taxes can be deducted in full from your income for purposes of taxation. The real estate taxes must be actually paid before you can claim them as a deduction. If you receive refunds on your real estate taxes, you should deduct that amount from your tax deduction.

Home Office Cost

If you work at home, you may deduct the cost related to the portion of the house used as an office. You may claim the cost of renovations, improvements and depreciation related to the portion of the home used as a workplace as tax deductible. However, the IRS allows you to deduct home office cost only if you use a portion of your home solely for your business. This means that if you have, for example, a one-bedroom home and use the bedroom for office space, you are not allowed to deduct home office cost because that room is also regarded as sleeping or living space.

Cost Related to Home Sale

The costs you incur in selling your home are deductible from your capital gains tax, so make sure that you keep track of all the expenses related to the sale of your home. Your selling experience may include the amount you paid to the real estate broker, advertisement cost and the like.

Moving Costs

Some moving costs you incur when you transfer from one home to another may be claimed as deductible. However, before you can claim moving costs as tax deductions, you need to comply with a number of requirements set by the IRS.

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