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TOP 5 HOMEOWNER TAX DEDUCTIONS

Spring means three things: flower buds, Easter baskets, and taxes. April 15th is just around the corner, so while you gather up your W2s, 1099s, child care receipts and bank records, you also might want to grab your mortgage statement.When you sign your name on the dotted line and become a homeowner, you also become eligible for several additional tax deductions. The government encourages home ownership, and as a “reward” for those who own their own home, they are given a few tax breaks. In order to qualify for homeowner deductions, you will need to itemize your taxes. This may make the tax-filing process a bit more complicated, but the benefits far outweigh the complications.Deduction #1: Mortgage Interest When you closed on your house, home mortgage interest is generally listed on the closing statement. This amount can be deducted from your taxes on any mortgage up to $1 million. This can be a significant amount of money deducted from your taxes. Each subsequent year, the mortgage interest you pay can also be deducted.Deduction #2: Property taxesProperty taxes are paid one of two ways: they are either lumped in with your mortgage payment, and the mortgage company pays the county, or you write a separate check once a year for property taxes. When you receive your tax statement from the county, you can use this to deduct whatever you paid in property taxes during the previous year. If your payment is lumped together with your mortgage, you cannot claim this deduction until the money is actually paid on your behalf. Double check your Form 1098 for the amount you may deduct. Be aware that if you receive a partial refund of your property tax, the amount of the deduction you can claim will be reduced.Deduction #3: Selling costsRemember those endless trips to Lowe’s for last year's kitchen remodel? Save them all. Selling costs can include things such as repairs, title insurance, advertising expenses and broker’s fees. The IRS only allows the deduction of repair costs associated with selling if the repairs were made within 90 days of the sale. It’s also crucial that the repairs were made with the intent of improving your home’s marketability. These costs reduce your gain on the sale of your home, which can provide an added deduction.Deduction #4: Home OfficeFor small business owners, you can actually claim a deduction for working out of your home. The insurance, repairs, and depreciation all qualify for a deduction if you use a space in your home exclusively and regularly as either your principal place of business or a place where you meet and deal with customers or patients.This is one of the most common deductions, because of the millions of people who own a home-based business, or telecommute. In 2010 nearly 3.4 million taxpayers claimed the home office deduction.Deduction #5: Loan InterestIf you’ve taken out a loan in the last year, there are two ways to use this as a deduction as well. First, if the home was taken to make improvements on your home, or if the loan was taken out to build a new home, you may be able to deduct the interest. Qualifying loans are those taken out to increase your home’s value, adapt it to new uses or extend its life. This is generally considered major renovations, not simply new carpeting or painting. Construction loans quality for the deduction for up to 24 months, regardless of how long the actual construction takes.Whether you choose to file your taxes with a professional, or on your own with tax software, taking advantage of these deductions is simple. Any software on the market will walk you through each step to be sure you’re getting the most out of your real estate investment.

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