IT'S TAX TIME! TAX BENEFITS FOR THIS TAX SEASON!

April 15 - filing of tax deadline is just around the corner. With less than a week left until the filing deadline, everyone should have all the needed paper works ready by now.  For home owners, there are some additional tax benefits that they can enjoy. Here are some of them:

1. Mortgage Interest Deduction 

Mortgage interest are paid during the first few years of the mortgage term.  Through the home mortgage interest deduction, home owners are allowed to reduce their taxable income by deducting the amount of interest paid on the loan which is secured by their principal residence.  On a mortgage of up to $1 million, they can deduct the interest they've paid at settlement if they itemize their deductions on Form 1040.  

2. Property Taxes 

Property tax paid to the local municipality are deductible. The new home owner do not need to pay income tax on money that was spent on property taxes.  However, money held in escrow for the purpose of paying property taxes are not deductible - until the money is actually taken out of escrow and paid the property tax.

3. Selling Costs

Selling costs on the sale of a home can be claimed as tax deductions.  Closing fees, repairs, capital improvements costs, broker's fees and dvertising/marketing expenses required to sell their home will be deducted on the gain on sale of their home. Provided that the repairs were made within 90 days of the sale.  Maintenance items such as painting the home and changing the carpet are usually not considered as capital improvement.

4. Mortgage Insurance Premiums Deduction

Home owners that paid less than 20% down payment on their homes are required to pay Mortgage Insurance Premiums or MIP to protect the lender in case the borrowers default on the loan.  MIP payers can deduct those insurance payments as tax deduction when they file their returns. 

5. Energy Efficient Upgrade/Repair Deduction

The cost of the building materials used for energy efficient upgrades can be deducted on the total tax payable, not just a reduction in the taxable income.

6. Home Office Deduction 

Home owners can deduct a percentage of their mortgage, utilities and repair bills dedicated their office space. However, the home office must be the primary office location of the business or it is used as storage area for your business (i.e. samples, inventory, etc)

7. Construction Loan Interest Deduction

If a home owner has borrowed money to build a home, he/she may qualify to deduct the interest.  The interest deduction will only be applicable for the first 24 months of the loan even if the actual construction takes longer.  

Tax day is SOON! Do not delay, it's better to file even if you are not able to pay the taxes.  Just file and pay what you can.

Let me know if you have any more questions, I will be glad to help.  We have strong business relationships with CPA's and Tax Professionals that we would be happy to refer with any additional questions.