‘Tis the season to do your annual income tax return. Before you get started though, check out these home tax deductions you might be missing, which are all reported on Schedule A of your Form 1040 (unless otherwise noted below).
- Mortgage interest. You can deduct the interest you pay on your home’s mortgage, up to a limit of $1 million, as long as the mortgage was taken in order to buy, build, or improve your home. If you also took out a loan secured by the ownership of your home—such as to pay for college—you can deduct that interest as well.
- Mortgage insurance premiums. Homebuyers who put down less than 20 percent on the purchase of your new home are usually required to pay private mortgage insurance (PMI). That cost is deductible, but the amount will depend on your total income.Government loans—like FHA, VA, and the Rural Housing Service—may require a different type of mortgage insurance. This premium is also deductible.
- Prepaid interest. If you paid points at your closing—whether first mortgage or refinance—you qualify for the prepaid interest deduction. You will need a Form 1098 from the lender or your HUD settlement sheet from the closing.
- Property tax. You can deduct any real estate property taxes. If you bought your home in the past year, check the HUD settlement sheet to see if you paid any property tax at closing.
- Energy efficiency upgrades. If you improved the energy efficiency in your home last year, you might qualify for tax deductions, which are reported on Form 5695. The upgrades include a wide range of products and systems, including solar panels, low-flow plumbing appliances, dual-paned windows, and tankless or solar water heaters, geothermal heat pumps, and wind turbines
- Vacation home.
Talk to your tax advisor to learn more about the potential tax savings you can earn from your home.