Tax Deductions Every Homeowner Should Know About

Tax season strikes fear into the hearts of many. Before I was a home owner, doing my taxes wasn’t a big deal. Ten years ago, when I bought my house, I was overwhelmed by all the possibilities and associated jargon. I decided I needed professional help and you may too.

Please note that not all tax professionals or even some big name tax preparers may not be all they are cracked up to be. The biggest piece of advice I can give any home owner in regards to tax preparation is to ask around. Asking around about who really had good tax preparation done for reasonable rates ended up saving me thousands of dollars.

While every home owner has their own special set of circumstances, Jill Kopka, a CPA from South Hadley, MA offered a few suggestions all home owners should know when preparing their 2010 taxes.

 1. First, it may be better to wait a couple of extra weeks before filing, as there have been a number of changes to the tax regulations. The federal government has recently publicized the fact that they are working to update their own programs as a result of the changes.

2. As a home owner, your best option is usually to itemize in order to get the most returned to you.

3. Kopka said that the energy credits for such things as furnaces, water heaters, insulation materials, windows, and doors for 2010 (ending December 31, 2010) was 30 percent of the cost and installation with a maximum credit of $1,500. The work had to have been completed by the December 31 date as well. For the year 2011, Kopka said that home owners will still be able to benefit from energy upgrade tax credits. “However, the credit will now be for ten percent with a maximum of $500,” she said.

4. Kopka said that “With so many people going green, it will be good for them to know that all of the solar (panels, hot water systems) and geothermal tax credits are still in effect.” Home owners can still receive a 30 percent tax credit for these types of improvements.

5. You can deduct mortgage and real estate taxes on both your primary and a secondary homes (such as a vacation home).

6. If you have an income property, such as an apartment that is attached to your primary residence, you can deduct 100 percent of any renovations done to the apartment. If the renovations, such as a new heating system, affect both your residence and the apartment, you can deduct 50 percent of the cost. “Otherwise, the cost of renovations to your residence can not be deducted. The renovations simply add to the value of your house,” said Kopka.

7. If you have a home office/business that operates out of your home, you can deduct costs such as electricity, office supplies such as copiers or computers, heat, etc. at a percentage based on how much is office and how much is home. “You could deduct snow removal or landscaping if people came to your home for some type of service or appointments for example,” said Kopka.

8. Lastly, Kopka said that a somewhat newer deduction relates to mortgage insurance and when you purchased your house. “If you entered into a purchase and sale contract after 2006, you can deduct your mortgage insurance.”

SEE ALSO: Garage Door Tax Credits