What Deductions Can I Claim on My Income Tax for a House I Own?
Some of the costs of home ownership are tax deductible. If you are paying a mortgage, own a home business, or rent your property to others, you can deduct a number of costs from your tax liability, saving you a significant amount of money each year. If you are not sure about whether an expense is deductible, talk to an attorney or licensed tax professional about your concerns.
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Mortgage Interest and Points
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While you can't deduct your mortgage payments from your taxes, you can usually deduct the interest you pay on mortgages for first or second homes. Exceptions to this rule include situations where your mortgage balance is more than $1,000,000 or if you receive government mortgage assistance that partially covers your interest payments. In such cases, you may still be able to deduct some of your interest, but not all of it. Other expenses that you might be able to deduct from your income include "points", also known as loan origination fees, and mortgage insurance premiums.
Real Estate Taxes
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If your state or municipality levies real estate taxes on the value of the property, you may be able to deduct the amount you pay each year from your taxable income. You can deduct the tax if it is based on the assessed value of the real property and the taxing authority charges a uniform rate on all property in its jurisdiction. You can't, however, deduct special taxes that are charged to you because of special circumstances or services that you receive, according to IRS Publication 530.
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Home Office Deductions
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You can deduct many of the expenses required to operate a home office. For example, if you pay for a home-business rider on your homeowner's insurance, you can often deduct these premiums. You may also be able to deduct a percentage of your utility bills or the cost of repairs made to your office. Home-based workers should be aware, however, that taking these deductions can trigger an IRS audit: Make sure that you have documentation to back up the business necessity of these expenses.
Landlord Deductions
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If you rent property to others, you may be entitled to a number of tax deductions. In addition to the expenses of a home office, you can also deduct interest paid on loans to acquire rental property or the use of a credit card to make purchases for expenses associated with your landlord business, according to attorney Stephen Fishman in his article "Top Ten Tax Deductions for Landlords." Other deductible expenses include the cost of transportation to and from your properties while you are conducting business as well as rental property repairs.
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