Hey, Homeowners! These Little-Known Tax Deductions Can Save You Thousands

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You probably already know that owning a home comes with some sweet tax benefits, like the mortgage-interest and property-tax deductions. But did you know there’s a whole list of other homeowner-related tax breaks that you might be leaving on the table?

We’re not talking chump change, either. Homeowners already save an average of $3,000 a year in taxes from mortgage-interest and property-tax deductions, according to the National Association of Realtors. When you add in some of the lesser-known homeowner tax breaks, you could really be amping up the savings—and beating the IRS at its own game.

Back in December, Congress passed the Protecting Americans From Tax Hikes Act of 2015, which extended many exemptions that were about to expire and made others permanent. But to reap the benefits, you first have to know about them.

So, here we go! Check out these common—and not-so-common—homeowner deductions that you should take advantage of this year:

1. Mortgage interest deduction

If you’ve taken out a loan to buy a house, you can deduct the interest you pay on a mortgage, with a balance of up to $1 million. To access this deduction, you will have to itemize rather than take the standard deduction. The savings here can add up in a big way. For example, if you’re in the 25% tax bracket and deduct $10,000 of mortgage interest, you can save $2,500.

Of course, there are some limitations. For example, if you’re helping a family member pay his or her mortgage, you can’t deduct that interest on your tax return.

2. Private mortgage insurance

Qualified homeowners can deduct payments for private mortgage insurance, or PMI, for a primary home. Sometimes you can take the deduction for a second property as well, as long as it isn’t a rental unit. Here’s the catch: This only applies if you got your loan in 2007 or later.

Another restriction: This deduction only applies if your adjusted gross income is no more than $109,000 if married filing jointly or $54,500 if married filing separately.

3. Property taxes

You can include state and local property taxes as itemized deductions. An interesting note: The amount of the deduction depends on when you pay the tax, not when the tax is due. As a result, paying property taxes earlier could have a positive impact on your return.

4. Capital gains on a home sale

The dreaded capital gains tax can be avoided when the gain from selling your personal residence is less than $250,000 if you are a single taxpayer or $500,000 if you are a joint filer. To qualify, you must have owned and used the home as a primary residence for at least two years out of the five years leading up to the sale.

5. Medical improvements

If you’ve made improvements to your home to help meet medical needs, such as installing a ramp or a lift, you could deduct the expenses—but only the amount by which the cost of the improvements exceed the increase in your home’s value. (In other words, you can’t deduct the entire cost of the equipment or improvements.)

“A lot of this comes down to fact and circumstance,” says Gil Charney, director of The Tax Institute at H&R Block. “For example, if you’ve recently installed a heated therapy spa or hot tub in your home, you may be able to deduct the expense if there’s also evidence that, say, a physical therapist visits your home three times a week and you’re over a certain age.”

6. Home office

If you have a dedicated space in your home for work and it’s not used for anything else, you could deduct it as a home office expense.

“It doesn’t have to be an entire room,” Charney says. “It can just be a dedicated space.”

7. Renting out your home on occasion

If you rented out your home for, say, a major sports event like the Super Bowl or the World Series, or a cultural event such as Mardi Gras, the income on the rental could be totally tax free—as long as it was for only 14 days or fewer throughout the course of a year.

8. Discount points

Discount points, which are paid to lower the interest rate on a loan, can be deducted in full for the year in which they were paid. In addition, if you’re buying a home and the seller pays the points as an incentive to get you to buy the house, you can deduct those points, Charney explains.

9. Energy-efficiency tax credit

You can take advantage of an energy-efficiency tax credit of 10% of the amount paid (up to $500) for any green improvements, such as storm doors, energy-efficient windows, and air-conditioning and heating systems.

10. Loan forgiveness deduction

If you’re the owner of a foreclosed or short-sale home, you can take advantage of mortgage-debt forgiveness. For example, if you make a short sale of your primary home at $250,000 but owe $300,000 on your mortgage, the lender will forgive the extra $50,000 owed—and you don’t have to pay taxes on that amount.

For more tax tips, check out IRS Publication 530 for a list of what homeowners can (and cannot) deduct.

Source: Realtor.com, Renee Morad
http://www.realtor.com/advice/finance/these-little-known-tax-deductions-can-save-you-thousands/?iid=rdc_news_hp_carousel_theLatest

Resolve to Give Up These 8 Money-Wasters for a Down Payment Before 2017

The all important down payment. Most home purchase won't happen without it. For those of you having trouble saving up for a down payment, below is some advice you might find helpful.


The presents are unwrapped, the holiday decorations are packed up (or not, we won’t tell), and the ball has dropped on the end of 2015. It’s time to make some New Year’s resolutions—homeowner-style.

You can make 2016 the year of the down payment. Really.

By cutting a few things from your budget this year, you can speed up your progress toward having a down payment by the time those holiday decorations come back out of the closet. You probably knew these were splurges eating up your discretionary income, but did you know just how much? Don’t worry—we’ll do the painful math for you so you know what to kick to the curb in 2016.


1. Skip the latte

Annual savings: $876 (plus taxes!)

A medium latte at Starbucks costs $3.65. If you stop by every day before work, that adds up So, suffer through the free coffee at work and think instead of the new kitchen where you can create your own coffee bar.


2. Cut the gym membership

Annual savings: $696

The average monthly cost of a gym membership is $58 a month, or $696 a year, and that’s assuming you’re already a member and not paying sign-up fees as well. Not to mention that most of our good intentions taper off sometime in February and we end up paying for something we’re not even using.

We’re not telling you to stop exercising. But try getting creative with your routine instead. Enjoy the great outdoors! Walk on your lunch break! Ride your bike! You’ll bag a surprising amount of cash toward your down payment.amy schumer gym


3. Cancel the cable

Annual savings: $1,189

Cable gets more expensive every year. In 2015, cable customers paid an average of $99.10 a month, or $1,189.20 for the year, according to the Leichtman Research Group. If you drop the cable in favor of, say, Netflix at $7.99 per month, you’ll save $91.11 per month—or $1,093.32 for the year—and get commercial-free original shows. liz-lemon-12


4. While you’re at it, drop a streaming service

Annual savings: Nearly $100

You don’t really need to subscribe to all the streaming channels at once. If you have Netfix, Hulu and Amazon Prime, you’re paying roughly $25 a month. If you drop Amazon Prime, you could save $99 a year. If you drop Hulu or Netflix, you could save $95.88 a year. Tip: Hulu allows you to put your subscription on hold. So if you find yourself having less time for binge-watching, try suspending your Hulu account until you have more time for it and save yourself that dough.


5. Lower your mega smartphone plan

Annual savings: Up to $300 per year

Did you get one of those unlimited everything plans when you bought your phone and never changed it—even after you realized you don’t talk on the phone that much and Candy Crush Saga doesn’t use much data? If you switch to a lower plan—or at least drop a couple gigs of data—you could save $10 to $25 a month.


6. Pack a lunch instead of buying it

Annual savings: $1,714

Taking a sack lunch to work might make you feel like you’re back in elementary school, but let’s do the math on how much it saves on your lunch costs. The average daily cost for the American worker who bought lunch from a restaurant in 2015 was $11.14, according to Statista. That amount adds up to about $56 a week, or $2,674 a year. If you can make a sack lunch for $4 a day, you will spend about $20 a week, $80 a month, or $960 a year — an annual savings of about $1,714.


7. Quit drinking

Annual savings: $3,168

If you’re an avid social drinker, you may not realize how much those $10 cocktails are adding up.

Say you go out three times a week, ordering at least two cocktails at $10 each plus the standard $1 tip per drink. That adds up to $66 a week, $264 a month, and—wait for it—a whopping $3,168 a year.


8. Go to the cleaners much less

Annual savings: $1,354

Are you still taking most of your clothes to the cleaners? Costs of dry cleaning or laundering items can vary a lot. A survey by Consumers’ Checkbook determined the average price of laundering a men’s dress shirt was $1.87, laundering men’s khaki slacks was $5.57, and dry-cleaning a two-piece suit was $11.13. If you take in two pairs of slacks ($11.14), five shirts ($9.35) and a suit every week, you’ll pay about $31.63 a week before taxes, which can add up to about $1,645 a year. Based on those numbers, if you wash your own slacks and shirts and reduce by half the number of times you have your suit dry cleaned, you could save up to $1,354 a year.

Best of all, you won’t miss the things you cut (OK, maybe some), but you’ll rack up a truckload of money in 12 short months. In fact, drop everything from this list and you could bank nearly $9,400 by the end of the year. Take that, down payment!

Source: Realtor.com, Angela Colley
http://www.realtor.com/advice/finance/resolve-to-give-up-these-8-money-wasters-for-a-down-payment-before-2017/?iid=rdc_news_hp_carousel_theLatest