Did you buy or sell a home this year? Home ownership is an area rich with benefits when filing your tax return. With the year end approaching, it's time to gather your documents to take advantage of an array of credits and deductions. Below are a few not to be overlooked.
Capital Gains - When you sell your home, capital gains up to $250,000 can be excluded from income for single filers, and up to $500,000 for married couples. Other conditions have to be met, so check with your tax preparer.
Home Energy Credits - You can receive a credit of 30% of the cost of qualifying improvements, up to $1500, for making your home more energy efficient. Qualify by adding new insulation, caulking doors and windows, purchasing energy-efficient appliances, and more.
Tax deductions and Closing Costs - While most expenses are not deductible, certain closing costs can be added to the basis of your home and when you sell, this basis is used in calculating a gain or loss. Included costs are broker's commissions, attorney's fees, surveys, recording fees, title searches, transfer taxes and more.
Real Estate Taxes - You can deduct real estate taxes in the year paid, or any prorated taxes collected from you at closing.
Mortgage Deductions - The mortgage interest you paid on your principal, or second home is deductible if you itemize your deductions. The points paid to purchase your home are also deductible, even if paid by the seller. The mortgage insurance premium payments are deductible annually.
First Time Home Buyers - The IRS allows buyers to withdraw up to $10,000 from their traditional and ROTH IRAs penalty-free for the purchase of a home. You can also borrow up to half of your 401(k) balance, up to $50,000. The interest you pay on the 401(k) loan is not tax-deductible, unlike the interest on a mortgage loan.
Be sure to speak with your tax preparer to ensure you are enjoying all of the benefits for which you are eligible.