Homeowners get some nice perks when it comes to paying their income taxes. With tax time less than one week away, don't forget to make your homeownership work for you. You can often make deductions for repairs, mortgage interest and home-offices. The most talked about deduction that homeowners receive involves the interest you pay on your home mortgage. This deduction is used in many ways by brokers, lenders and real estate agents as a persuasion into owning a home. For the first years of your mortgage, the deduction will probably be quite a bit of money. But remember that as time goes by, your deduction will go down. Most mortgages front-load the interest payments. You pay more interest and less principal at first. With time, the principal amount increases as the interest amount decreases. Think of it as a thirty-year teeter totter. At some point in the life of your mortgage, you may realize that the interest isn't enough to help you out at tax time. You may even choose to go ahead and pay off the mortgage entirely. Most loans do not include prepayment penalties, but if yours does -- they too may be tax deductible. Until you sell a home, you don't realize how important it is to keep all those receipts for repairs on the home. Keep every improvement or repair receipt. When you sell the home, you can use these expenses to offset the profits you make on the sale. If you have to pay taxes on the profits, the receipts will help you reduce those taxes. For example, you may put a new roof on the home or simply remodel the bathroom. It doesn't matter the nature, the cost of the improvements can be added to the price you bought the home for. You should keep a file especially for those receipts so that you can find them without searching through years of receipts. If you relocate because of your job, you could qualify for a mortgage deduction. It doesn't have to be a new job. It could be your first job, a new job or the same job. Your job office has to be at least 50 miles away from where you live. You can deduct the moving van, any moving services, the cost of moving your vehicles, the use of storage and any hotel rooms you stayed in during the actual move. If your home is damaged by a disaster or theft and you were not compensated by insurance, you may be able to receive a deduction on your taxes. The un-reimbursed damage must be more than 10% of your adjusted gross income after you have subtracted $100 from the un-reimbursed amount. But if you were a victim of Hurricane Katrina, there are separate rules that govern you. You will also be able to amend last year's return and claim this year's loss. Check with your CPA for any additional information on damage deductions. Home-office deductions can be tricky. You can only use the office for one purpose -- your work. You can't let your husband play computer games at your desk or let your children use the space for homework. It must be treated like an office in a traditional business would be used. This deduction is based on the square footage of your home as compared to the square footage of your home office. You can deduct the percentage from your household bills. The key to getting all you can out of your tax deductions is knowing that they exist. Unfortunately, tax preparers don't always have the time to ask about every deduction that could apply to you. You must bring up everything you can to get what you deserve. |
