Overlooked Tax Deductions for Homeowners
Homeowners who take the standard yearly income tax deduction may be paying higher taxes than those who itemize. By claiming the standard deduction, homeowners overlook deductions from their taxable income including unclaimed mortgage points, energy-efficiency improvements and moving expenses. Researching available deductions and completing the necessary forms from the Internal Revenue Service can significantly lower a homeowner's tax liability.
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Mortgage Points
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Financial institutions refer to prepaid mortgage interest as points; one point is equal to 1 percent of the loan. The points you pay for your first mortgage are tax deductible during the tax year when you paid them. Points paid to refinance your mortgage are also tax deductible, but you must divide your deduction equally over the life of the mortgage. For instance, points paid to refinance a 20-year mortgage must be deducted equally over 20 years. If you refinance again with a different lender, however, you may deduct any undeducted points from the previous mortgage in the year you refinance.
Energy Efficiency Improvements
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The product cost of some energy-based home improvements are deductible in the form of a dollar-for-dollar tax credit. Improvements meeting government-defined energy standards, including energy-efficient windows and doors, grant a tax credit of 10 percent of the product cost up to a $500 maximum for 2011. The maximum credit for windows is $200. Other restrictions include a "lifetime maximum" credit of $500 from 2006 to 2011; if you claimed $500 or more in previous years, any new improvements are ineligible.
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Home Office Deduction
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Homeowners are eligible for a deduction if they use part of their primary residence exclusively as a place of business. Areas of the home used regularly and exclusively as a meeting space for clients and customers are eligible, as are separate structures on the same property used for business purposes. If you are self-employed, part of your home may also be eligible for this deduction; complete Form 8829 to determine your home's eligibility. The total deduction is related to the percentage of your home used for business.
Moving Expenses
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If you're moving into a new home to work at a new job, you may be eligible for a tax deduction related to your moving expenses. To qualify, your new job must be at least 50 miles away from your former residence. If you pass this distance requirement, expenses such as tolls and mileage may be deductible from your taxable income. Calculate your moving-related deduction on Form 3903.
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References
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