Whether someone is a current homeowner or buying a new home this summer owning a home can be expensive. There are tax benefits that can help taxpayers save money and offset some of the costs that come with homeownership. Homeowners should review the tax deductions, programs and housing allowances to see if they are eligible.
Deductible house-related expenses
Most home buyers take out a mortgage to buy their home and then make monthly payments to the mortgage holder. This payment may bundle other costs of owning a home.
The costs the homeowner can deduct are:
- State and local real estate taxes, subject to the $10,000 limit.
- Home mortgage interest, within the allowed limits.
Taxpayers must itemize their deductions to deduct homeownership expenses.
Homeowners can’t deduct any of the following items:
- Insurance including fire and comprehensive coverage and title insurance.
- The amount applied to reduce the principal of the mortgage.
- Wages paid to domestic help.
- Depreciation.
- The cost of utilities, such as gas, electricity or water.
- Most settlement or closing costs.
- Forfeited deposits, down payments or earnest money.
- Internet or Wi-Fi system or service.
- Homeowners’ association fees, condominium association fees or common charges.
- Home repairs.
Mortgage Interest Credit
The Mortgage Interest Credit helps people with lower income afford homeownership. Those who qualify can claim the credit each year for part of the home mortgage interest paid. A homeowner may be eligible for the credit if they were issued a qualified Mortgage Credit Certificate from their state or local government. A certificate is issued only for a new mortgage for the purchase of a main home.
Ministers and military housing allowance
Ministers and members of the uniformed services who receive a nontaxable housing allowance can still deduct their real estate taxes and home mortgage interest. They don’t have to reduce their deductions based on the allowance.
