Sure, the First-Time Homebuyer tax credit that was so popular a couple of years ago no longer exists, but that doesn’t mean you lack tax savings as a homeowner. Now, we aren’t tax specialists, so speak with your accountant if you have questions about homeowner tax breaks. But here’s a bit of what we know. By the way, most of these were set to expire at the end of 2014 but were extended until the end of 2015 so you can use them when you calculate your 2014 taxes.
If you paid less than 20 percent for a down payment on your home the lender tacked on a private mortgage insurance policy. Although the homeowner pays the monthly premium, this insurance only benefits the lender – if you default on the loan.
Aside from those with FHA loans, PMI can be removed once you hit the magic equity number. Until then, it’s pay, pay, pay, every month.
If you purchased your home in 2007 or later and meet income limits you’ll be able to deduct not only the interest, but the PMI as well.
Distressed Homeowner Relief
President Bush’s Mortgage Forgiveness Debt Relief Act has been extended again. If you suffered a short sale or foreclosure last year there will be no tax on the cancelled debt for your primary residence, according to US News.
Before this Act was written, folks who performed a short sale or foreclosure were taxed on the amount of debt forgiven – and it was taxed as ordinary income. Say, for instance, you owed your lender $200,000 but it sold for only $150,000. That $50,000 in cancelled debt would have been taxed by the federal government.
This extension means that distressed homeowners can write off up to $2 million of forgiven debt, as long as the home was their primary residence.
Energy Tax Credits
If you made certain home improvements last year you may be eligible for a tax credit of up to $500. Some of the improvements covered include new, energy efficient windows, a new roof, new HVAC system and more.
You’ll receive 10 percent of the cost of the improvements, to a maximum of $500. There is also another program, the Residential Energy Efficient Property Credit, which expires at the end of 2016, so make those improvements now! This one allows credits of up to 30 percent for certain energy improvements.