Owning a home can pay off at tax time.
Take advantage of these homeownership-related tax deductions and strategies to lower your tax bill:
Mortgage Interest Deduction
One of the neatest deductions itemizing homeowners can take advantage of is the mortgage interest deduction, which you claim on Schedule A. To get the mortgage interest deduction, your mortgage must be secured by your home — and your home can be a house, trailer, or boat, as long as you can sleep in it, cook in it, and it has a toilet.
Interest you pay on a mortgage of up to $1 million — or $500,000 if you’re married filing separately — is deductible when you use the loan to buy, build, or improve your home.
If you take on another mortgage (including a second mortgage, home equity loan, or home equity line of credit) to improve your home or to buy or build a second home, that counts towards the $1 million limit.
If you use loans secured by your home for other things — like sending your kid to college — you can still deduct the interest on loans up $100,000 ($50,000 for married filing separately) because your home secures the loan.
PMI and FHA Mortgage Insurance Premiums
You can deduct the cost of private mortgage insurance (PMI) as mortgage interest on Schedule A if you itemize your return. The change only applies to loans taken out in 2007 or later.
By the way, the 2014 tax season is the last for which you can claim this deduction unless Congress renews it for 2015, which may happen, but is uncertain.
What’s PMI? If you have a mortgage but didn’t put down a fairly good-sized downpayment (usually 20%), the lender requires the mortgage be insured. The premium on that insurance can be deducted, so long as your income is less than $100,000 (or $50,000 for married filing separately).
If your adjusted gross income is more than $100,000, your deduction is reduced by 10% for each $1,000 ($500 in the case of a married individual filing a separate return) that your adjusted gross income exceeds $100,000 ($50,000 in the case of a married individual filing a separate return). So, if you make $110,000 or more, you can’t claim the deduction (10% x 10 = 100%).
Besides private mortgage insurance, there’s government insurance from FHA, VA, and the Rural Housing Service. Some of those premiums are paid at closing, and deducting them is complicated. A tax adviser or tax software program can help you calculate this deduction. Also, the rules vary between the agencies.
Prepaid Interest Deduction
Prepaid interest (or points) you paid when you took out your mortgage is generally 100% deductible in the year you paid it along with other mortgage interest.
If you refinance your mortgage and use that money for home improvements, any points you pay are also deductible in the same year.
But if you refinance to get a better rate or shorten the length of your mortgage, or to use the money for something other than home improvements, such as college tuition, you’ll need to deduct the points over the life of your mortgage. Say you refi into a 10-year mortgage and pay $3,000 in points. You can deduct $300 per year for 10 years.
So what happens if you refi again down the road?
Example: Three years after your first refi, you refinance again. Using the $3,000 in points scenario above, you’ll have deducted $900 ($300 x 3 years) so far. That leaves $2,400, which you can deduct in full the year you complete your second refi. If you paid points for the new loan, the process starts again; you can deduct the points over the life of the loan.
Home mortgage interest and points are reported on Schedule A of IRS Form 1040.
Your lender will send you a Form 1098 that lists the points you paid. If not, you should be able to find the amount listed on the HUD-1 settlement sheet you got when you closed the purchase of your home or your refinance closing.
Property Tax Deduction
You can deduct on Schedule A the real estate property taxes you pay. If you have a mortgage with an escrow account, the amount of real estate property taxes you paid shows up on your annual escrow statement.
If you bought a house this year, check your HUD-1 settlement statement to see if you paid any property taxes when you closed the purchase of your house. Those taxes are deductible on Schedule A, too.
If you made your home more energy efficient in 2014, you might qualify for the residential energy tax credit.
Tax credits are especially valuable because they let you offset what you owe the IRS dollar for dollar for up to 10% of the amount you spent on certain home energy-efficiency upgrades.
The credit carries a lifetime cap of $500 (less for some products), so if you’ve used it in years past, you’ll have to subtract prior tax credits from that $500 limit. Lucky for you, there’s no cap on how much you’ll save on utility bills thanks to your energy-efficiency upgrades.
Among the upgrades that might qualify for the credit:
Vacation Home Tax Deductions
The rules on tax deductions for vacation homes are complicated. Do yourself a favor and keep good records about how and when you use your vacation home.
Homebuyer Tax Credit
This isn’t a deduction, but it’s important to keep track of if you claimed it in 2008.
There were federal first-time homebuyer tax credits in 2008, 2009, and 2010.
If you claimed the homebuyer tax credit for a purchase made after April 8, 2008, and before Jan. 1, 2009, you must repay 1/15th of the credit over 15 years, with no interest.
The IRS has a tool you can use to help figure out what you owe each year until it’s paid off. Or if the home stops being your main home, you may need to add the remaining unpaid credit amount to your income tax on your next tax return.
Generally, you don’t have to pay back the credit if you bought your home in 2009, 2010, or early 2011. The exception: You have to repay the full credit amount if you sold your house or stopped using it as primary residence within 36 months of the purchase date. Then you must repay it with your tax return for the year the home stopped being your principal residence.
The repayment rules are less rigorous for uniformed service members, Foreign Service workers, and intelligence community workers who got sent on extended duty at least 50 miles from their principal residence.
Related: A Homeowner’s Guide to Taxes
This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.
Read more: http://www.houselogic.com/home-advice/tax-deductions/home-tax-deductions/#ixzz3SawQLfnp
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Article written by: Donna DeZube: has been writing about real estate for more than two decades. She lives in a suburban Baltimore Midcentury modest home on a 3-acre lot shared with possums, raccoons, foxes, a herd of deer, and her blue-tick hound.
Photo credit: Liz Foreman for HouseLogic
Are you enjoying your new empty nest? Or are you heartbroken and missing your kids? Are you getting ready to have your last one leave?
I think we all go through different stages of joy and pain when our kids leave the nest. Our youngest left in the fall of 2013 for 1 year and then returned home. During that year, my husband and I discovered some amazing times of no sports schedules, no extra meals to make, a much cleaner home, and privacy (what is that???)...just the two of us. Other times we found we had marriage challenges that we put on the back burner...but didn't even know it.
I recently read an article from the FocusOnTheFamily.com website talking about Empty Nest Syndrome. Here are a few excerpts:
Benefits: The first thing most empty nesters notice is that the house is quieter. You can get to bed earlier because there's no more loud music, the clatter of young people arriving and leaving, the TV or talking keeping you awake. And it's easier to fall asleep when you're not worrying about whether your teenager will make it home safely. An added benefit — the car is available when you need it!
One extremely noticeable difference is at dinner: you and your spouse alone, facing each other across the table, wondering what to talk about.
Becoming Friends again: In Song of Songs 5:16, his lover calls Solomon her "friend." The empty nest can be a time to become "friends," to renew and deepen your friendship with your spouse. Without interruptions from children, you can have longer and more meaningful conversations. Since you are no longer attending school activities and meetings, you can use evenings to go on dates again. Or you might start traveling by yourselves and rekindle the romance of your pre-parenting years! Another upside is simplified meal preparation (e.g. one meal is enough for two nights of dinners). Eating out can be spontaneous and will cost less.
The empty nest is generally not the same experience for dad as it is for mom, especially if dad is still at his job all day and the mom is primarily a homemaker. For her, the added time can be used to resume or start a career or to pursue hobbies and projects she didn't have time for with children underfoot.
Dads get phone calls from fledglings whenever one of them has a computer problem or needs advice on technology purchases (digital cameras, iPods, cell phones). Moms get the calls during peak emotional times (roommate crises, boyfriend/girlfriend concerns, stress overload). Fortunately, our generation benefits from technology that allows us to stay connected with our children via e-mail, cell phones and Facebook!
I think this is all such great advice. We need to take the extra time and get to know our spouses again. Have a planning night each week, for us it is Sunday nights. We discuss the week ahead and non-negotiable events already on the calendar like mid-week or Sunday service. Then schedule our date night and dinner with friends or family.
Also, how can you serve your community or church now that the kids are gone? Usher or be a teacher in children's ministry. What about the Youth and Family ministry? Our children were blessed to have a strong Youth and Family ministry to grow through. Strong teaching and Godly convictions helped our children grow to be strong men and women of God. You could help mentor singles or newly married couples.
Whether you are seeking God or not, there are many ways to encourage your spouse and build a strong empty nest. Your children may be grown but they will never stop seeking your advice and counsel. Stay strong in your marriage, set an example for your fledglings.
Proverbs 22:6 "Train a child in the way he should go, and when he is old he will not turn from it." (NIV)
If you are seeking a great group of Godly women or church shopping, please let me know. Our church site is www.NVCOC.org. We meet on Sundays at Oakton High School in Oakton at 10am and on Wednesdays we meet by region at 730pm.
We all learned in school that when selling anything, you will get the most money if the demand for that item is high and the inventory of that item is low. It is the well-known Theory of Supply & Demand.
If you are thinking of selling your Herndon home, here are two graphs that strongly suggest that the time is now. Here is why…
According to research at the National Association of Realtors (NAR), buyer activity last month (January) was three times greater than it was last January. Purchasers who are ready, willing and able to buy are in the market at great numbers.
The most recent Existing Home Sales Report from NAR revealed that the months’ supply of housing inventory had fallen to 4.4 months which is the lowest it has been in over a year.
Listing your Herndon house for sale when demand is high and supply is low will guarantee the offers made will truly reflect the true value of your property.
Interest rates are still low and buyers are in the market for "move-in" ready homes in the Herndon area. If you are considering buying or selling a home in Herndon, please contact me to discuss your options.
Sellers can potentially save thousands of dollars in unnecessary repairs but speaking with me first. Let our expert stagers discuss with you what buyers are looking for in this market. Call me today. No obligation! No pressure! Just education! I can be reached at LAnies@HomeDCMetro.com or 202-409-7513.
Reblogged from www.KeepingCurrentMatters.com by the KCM Crew on 2/19/15.
If you are considering an update to your Herndon kitchen, check out this one that a neighbor in Crestbrook completed. These before and after photos are pretty great! As you can see they have fully renovated every aspect of the space. The contractor removed the bulkhead and dropped ceiling lighting and added recessed lighting. All of the cabinetry was replaced as well as granite countertops and tile backsplash. Stainless steel appliances replaced the old outdated white appliances. A really cool chalk wall was added to the end of the pantry. This project cost roughly $15k to complete.
Did you know that you can get new or almost new appliances at Restore? Check out their website: http://www.habitat.org/env/restores.aspx.
If you are considering updating your Herndon kitchen or buying or selling a home in Herndon, please contact me at LAnies@HomeDCMetro.com or 202-409-7513.
Here is a list of open houses in Herndon, Oak Hill, Reston, Potomac Falls and Sterling. Use the drop down menu to see the open houses in the other locations. Should you want to see one of these awesome listings, please contact me at LAnies@HomeDCMetro.com or 202-409-7513. Happy Hunting!
I like working with companies that provide outstanding customer service and attention to detail. I also enjoy working with small businesses that have the "whole" customer design focus, not just one part. Dulles Electric Supply is that company!
Similar to the company that I work for, @home real estate lounge & design center, Dulles Electric Supply is a locally owned, veteran owned and operated Sterling Virginia small business that supports the "whole" design concept when it comes to decorating or remodeling your Herndon or Sterling home. Not just lighting and fixtures. Dulles Electric Supply offers an "experience" center which showcases actual rooms set up and decorated to give you that true lighting experience. They offer many lighting galleries to choose from as well as designers showcasing their lighting products.
Hear what Sharina Mendoza, Director of Marketing, has to say about Dulles Electric Supply and their design and showcase center.
Dulles Electric Supply is located in Sterling Virginia at 22570 Shaw Road, near Route 28 and Sterling Blvd. Dulles Electric Supply is a true destination showroom for all of your lighting and electrical needs.
Check their company out on Facebook at https://www.facebook.com/DullesElectric. And their website is http://www.dulleselectric.com/. Stop by and see Sharina for a tour. 703-450-5700
Considering a remodel of your Herndon home? Refinancing your Sterling town home? Ready to sell your Herndon single family home? Please contact me LAnies@HomeDCMetro.com as I am happy to assist with any needs you have. 202-409-7513 .
I am always posting my amazing chef husband's meal photos on Instagram. People always comment they want the recipe. So I thought I would start a section about "what on the chef's menu today". :) Here are some photos of dinner last night. Yummy and simple!
The first dish is Roasted Brussel Sprouts. The chef sliced the little cabbages in half and tossed them with garlic, olive oil, a dash of red pepper flakes and salt, then roasted for 15 minutes or browned - 350 degrees.
The second dish is baby Yukon potatoes cut, parboiled and then sauteed with garlic, oregano, basil, heavy cream and parmesan cheese.
Lastly, we have easy salisbury steak. Ground beef mixed with onions, garlic, salt and pepper and an egg for a binder. He baked the patties for 25 minutes at 350 degrees. The salisbury steak was topped with a gravy made from the meat drippings, flour, beef stock, salt and pepper and butter.
If you need a recipe, need a small dinner party catered or want a private cooking lesson, just reach out! Thanks and bon apetite!
Mom. Mother-in-law. Chef's Wife. Navy Chief's Wife. Realtor. Christian. Connector. Empty Nester. Business Woman. Foodie.