New buyers can get overwhelmed by the additional expenses incurred during homeownership. Besides making monthly mortgage payments, homeowners may have to pay for gardening, pest control, pool maintenance, plumbing fixes, electrical work and more.
But the good news is that tax time offers homeowners a number of deductions and credits not available to renters. Check with a tax consultant to see if these deductions apply to you.
Private Mortgage Insurance
PMI is the premium you pay every month until your equity equals 20 percent of your home’s value. Luckily, these premiums can be deducted from your income.
If you paid more than $600 dollars in mortgage interest during the tax year, every penny you paid is deductible—and that includes interest on a second mortgage.
Local Real Estate Taxes
Some taxpayers overlook the fact that homeowners can deduct local, state and even foreign real estate taxes on their federal returns. Lower-income homeowners may also get special property tax benefits from their state or municipality, so look into further breaks specific to your community.
Losses From Weather, Fire or Theft
While nobody wants a tree to fall on their house or burglars to make off with their flat screen, the IRS grants a break to any property or casualty loss that is more than 10 percent of your gross income and is not reimbursed by your insurance.
If you moved 50 miles or more for a new job during the tax year, you can deduct your moving expenses. (Note, that if you started the new job more than a year before purchasing the new home, the moving expenses are not tax deductible.)
If you sold a home during the tax year, the commission paid to a real estate agent is tax deductible, as are any legal fees and closing costs. Just like home-improvement costs reduce your cost basis, so do your selling costs.