After quality of life, one of the bigger advantages in owning your own home is the tax saving opportunities. Many homeowners don't even know all the deductions that they are entitled to, so it is always a good idea to get the most up to date advice from a good tax professional. This week Rich and Steve had one of the state's foremost tax experts, Patricia Thompson and her colleague Barbara Kennedy from the Providence accounting firm Piccerelli Gilstein and Co. LLC., with great tips to help homeowners get every deduction coming to them. Pat and Barbara had a good time playing good cop- bad cop, Barbara gave the good news, and Pat the bad, but in the end it was all good. Here are some of the deductions they talked about. If you find that there were some deductions you missed last year, don't fret, Pat advises you may be able to file an amended return. - Homeowners may take the interest on their mortgage of up to $1 million as an itemized deduction. The interest can be on their principal residence and one additional residence.
- For most, up to $100,000 in home-equity loan interest can also be deducted. In regards to the alternative minimum tax (AMT), interest on home equity loans is deductible only if the loan is used to acquire, build or "substantially improve" a home.
- Points paid on a home mortgage loan for the purchase or improvement of a principal residence are deductible in the year paid to the extent that the points represent a customary practice
- Points paid on a refi must be deducted over the term of the loan.
- Homeowners can exclude up to $250,000 of gain on the sale of their homes (up to $500,000 for joint filers) if they have owned and lived in the home as their principal residence for two out of the five years prior to the sale, although a partial exclusion may be available for sales due to change of employment, health or circumstances.
- Through 2010, mortgage insurance premiums may also be deducted as mortgage interest, but the insurance had to be originally acquired on or after January 1, 2007.
- Homeowners are also able to take their state and local property taxes as an itemized deduction.
- If a residence of the taxpayer is rented for fewer than 15 days during the year, the rental income is excludable from gross income and no deductions attributable to such rental are allowable.
- If you own a home and installed qualifying energy-efficient fixtures and systems by December 31, 2010, you may claim a 30% tax credit - up to a maximum of $1,500 for both the 2009 and 2010 tax years. The American Recovery and Reinvestment Act of 2009 (ARRA) provides for energy tax credits applying to the installation of insulation and energy-efficient exterior windows and doors, heat pumps, furnaces, central air conditioners and water pumps.
- A separate 30% credit is available to homeowners who installed alternative energy equipment such as fuel cells, solar water heaters, solar electric equipment, small wind energy property and geothermal heat pumps, geared mostly for businesses; it's also available for homeowners.
Listen to this week's podcast here: [audio src="https://www.residentialproperties.com/blog/wp-content/uploads/2011/13/REI_03_27_2011.mp3"]
