HAVE YOU THOUGHT ABOUT THE TAX DEDUCTIONS YOU CAN TAKE WHEN YOU OWN A HOME?

Nobody likes paying taxes, but some households can take more deductions than others. If you are a homeowner, you have to opportunity to take some special tax deductions that are not available to renters. If you own a home or are thinking about buying or selling, take a look at some of the perks the IRS offers so you can save yourself money

1) Deduct your mortgage interest.

Homeowners get the perk of deducting all of the interest they pay on mortgage balances of $1 million or less ($500,000 if married filing separately).

Tax director John Battaglia, of Deloitte & Touche's Private Client Advisors Group, pointed out that if you’re in the 30% tax bracket and can afford $1,000 a month for your home before you take mortgage interest into account, that amount is actually $1,240 after taxes. If you figure $800 of that $1,000 payment is mortgage interest, as it can be in the early years of your mortgage, you'll get 30 percent of that $800 back from the IRS, or $240. And so, a new homeowner can actually afford a $1,240 payment.

2) Maximize your home office deductions.

If you have your own business and run it regularly and exclusively from your home, you can deduct certain home office costs. If you have a home office, you can deduct your utilities, repairs, maintenance and other upkeep-related expenses. New furniture or equipment for the office are deductible for the tax your when they are physically installed (not just purchased) by Dec. 31.  These deductions can all be taken on IRS Schedule C.

3) Have a home equity loan? Deduct the interest.

The amount of interest you pay on a home equity loan up to $100,000 is always deductible.
 
"It doesn't matter what you spend that loan on," Battaglia observes. "You can go out and borrow $100,000 against your home, spend it on anything, even a vacation - and you can deduct the full amount of interest you pay on that loan."

4) If you refinance your mortgage, deduct the points.

“When you refinance, you may end up paying a mortgage point - that amount is fully deductible, spread out over the life of the loan,” notes tax agent Tony Bardi.

"Points" are chunks of the mortgage interest that are paid up front, rather than over the life of the loan. Lenders may offer points in exchange for a lower interest rate overall. If you previously refinanced your mortgage and were deducting points over the life of the loan, you can deduct the remaining amount in the year you refinanced again.

5) Prepay your January mortgage installment.

"If my clients are looking to get a little extra deduction, I tell them to pay their January mortgage installment in early December, so that it's credited by Dec. 31," offers Bardi. "That way they can deduct the interest on that payment as well."

Be advised, you can't just mail a check by the 31st - the payment needs to be processed by that time. If this deduction interests you, call your lender and ask when they'll need to receive your check in order for them to process it by the end of the year.

6) Ensure your property tax payment is processed by Dec. 31.

Pay the second half of your property taxes in December; if the state has processed your check before the end of the year, then you can deduct your tax payment.

7) Is a 1031 exchange right for you?

This rule does not apply to your primary residence, but it’s a great perk for those with business and investment properties. According to IRS Code 1031, you can swap similar properties and defer any tax payment. If you have a rental property worth $200,000 and want to exchange it for another income property of equal or greater property, you can do so without paying capital gains tax.