Tax Saving Tips For Your Magnolia TX Home
One of the major advantages of owning a Magnolia TX home becomes readily apparent at this time of year, and that is, of course, tax deductions and credits. Because you, as a homeowner, can deduct 100% of the mortgage interest, mortgage insurance and property taxes on your tax returns, write off many of your closing costs, and be eligible for an exemption for all or most of the profit gained from a resale, Uncle Sam effectively subsidizes nearly a third of your borrower costs over the life of the loan.
Naturally, in order to reap these benefits, you will have itemize your deductions on your return, but that is certainly time well spent in view of your savings. And better yet, in addition to deductions, there are also tax credits available to you as an owner of a Magnolia TX home. Remember, the tax credit actually reduces the amount of taxes you will pay, whereas a deduction reduces the amount of your taxable income.
- Energy-efficient products or renewable energy systems.
- The purchase and installation of these features qualify you for a tax credit of up to $1500 (30% of the cost). ENERGY STAR* products such as doors, windows, roofs, insulation, nd heating and cooling equipment–including geothermal heat pumps–are eligible for this credit, but you must have your receipt and a Manufacturer’s Certification Statement and file IRS form 5695 to claim it. Here you can verify that your expenditure qualifies for a credit.
- Mortgage interest — includes late payment charges and prepayment penalties.
- Property taxes
- Equity loan interest
- Closing costs for new or refinanced loan–origination fees and discount points, even if paid by the seller!
- Private mortgage insurance taken out after 2006 in conjunction with home acquisition debt on your qualifying Magnolia TX home, something which is usually required if your down payment is less then 20%.
- Moving expenses–provided you new job is at lest 50 miles farther from your old house and that your company has not reimbursed you for these expenses. According to the IRS, “If you meet the requirements, you can deduct the reasonable expenses of moving your household goods and personal effects to your new home. You can also deduct the expenses of traveling to your new home, including your lodging expenses. You cannot, however, deduct meals.” Use IRS form 3903 for these deductions.
- Home office use. According to the Small Business Administration, the average home office deduction is $3686, so it is to your advantage to explore this area as you prepare your return. Be aware, however, that a designated home office space is not exempted from the capital gains tax when you see your Magnolia TX home.
- Home improvements (not just repairs!). Most home improvement expenses are not deducted in the year they are incurred. Rather, they are added to the basis of your home when you sell it and result in a decrease in capital gains and tax liabilities at that time.
Home improvements done for medical reasons (attested to in writing by a qualified doctor). You are allowed to deduct any amount over 7.5% of your adjusted gross income.You can, however, deduct that interest paid on a home improvement loan and the sales tax paid on building materials.
Note for Distressed homeowners:
The Cancellation of Debt Income associated with loan modifications, short sales, and foreclosures will be waived by the IRS through 2012.