Tax benefits for homeownership

Homeowners should review any tax benefits for homeownership

The year is nearly half over which makes it a good time to remind homeowners and future homeowners to review their eligibility for any tax deductions, programs and housing allowances. If eligible, these tax benefits could help with some of the common costs of being a homeowner.

Deductible house-related expensesTaxpayers must itemize their deductions to deduct homeownership expenses. Most home buyers take out a mortgage to buy their home, and their mortgage lender may bundle other home-related costs.The costs the homeowner can deduct are:

• State and local real estate taxes, subject to a $40,000 limit or $20,000 if married filing separately

• Home mortgage interest, within the allowed limits

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 CreditThe 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.

Ministers and military housing allowanceMinisters 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.

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