As we celebrate the holidays and ring in the new year, it’s time to start thinking about goals. Financial stability is one of the top five resolutions made each year. And of the 40% of Americans participating, only a mere 8% actually achieve those New Year’s goals. Why so few?
Well, as it turns out, there’s far more to goal setting than meets the eye. It isn’t enough to want something. According to Psychology Today, resolutions are a form of “cultural procrastination,” an effort to reinvent oneself. And when people make them, they don’t realize that change requires a new pattern of behavioral habits.
So, the key to following through with New Year’s resolutions — is by turning the goal into a series of actionable items. What does this look like for businesses? It could be saving money or cutting back on expenses. But, the easiest way to add some padding to your pocketbook is simply by taking advantage of these six real estate tax deductions. Ready to get started?
1. Mortgage Interest Deduction
First and foremost, as a homeowner you need to be taking advantage of a mortgage interest deduction — which you’ll claim on Schedule A. The interest you pay on a mortgage up to $1 million is deductible when you use the loan to purchase, build or improve your home. When you pay off your home, if you take on a second mortgage of home equity line of credit, that will also count towards the limit. Pretty neat, eh?
2. Prepaid Interest Deduction
Any prepaid interest, or “points,” is generally deductible during the year you pay it. If you choose to refinance, any home improvement points paid are also deductible that year. You can report these points on Schedule A of IRS Form 1040.
3. Property Tax Deduction
Squaring back to Schedule A, you can also take out a deduction on your real estate property taxes. If you’re a first-time homebuyer, check your HUD-1 settlement to check if you paid any property taxes when you closed your original home. They’re deductible too!
4. PMI and FHA Mortgage Insurance Premiums
Ready for some more real estate tax deductions? You can deduct the cost of private mortgage insurance as interest as long as you itemize your return. A tax advisor is handy when calculating this section — especially considering any insurance from FHA, VA or the Rural Housing Service.
5. Vacation Home Tax Deductions
Own a vacation home? Keep a close record on when and who uses it. If you’re the sole owner, you can deduct mortgage interest and real estate taxes. If you rent it out more than 14 days a year, it’s treated like a rental property which you’ll find on Schedule E.
6. Energy Efficient Upgrade
Society is all about going green and it looks like the government has hopped on board. The Nonbusiness Energy Tax Credit lets you claim energy-efficient home systems, which usually offsets what you spent on the initial upgrades. Here are some of the upgrades that might qualify your household for the credit. Be sure to include them on IRS Form 5695.
- Biomass Stove
- Heating, Air Conditioning and Ventilation
- Roofing (Metal and Asphalt)
- Water Heater (Non-Solar)
- Windows, Doors and Skylights
Phew! Can you believe all those deductions and credits?
We don’t know about you, but we think it’ll be a cakewalk saving some money this year. For more information on real estate tax deductions, be sure to hop on over to the official IRS page here. For any real estate questions you may have, you can always give our team at Rieger Realty a call at (405) 310-2796.