April 18th will soon be upon us (we have an extra few days to file in 2016) and it’s time to start thinking about deductions. 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. Most of these were set to expire at the end of 2015 but were extended until the end of 2016 or 2017 so you can use them when you calculate your 2015 taxes.
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.
If you paid less than 20 percent for a down payment on your Southcentral 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, through 2017. If you suffered a short sale or foreclosure last year there will be no penalty, according to the IRS. 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 your home 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 in Southcentral 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 to your Southcentral home last year you may be eligible for a tax credit of up 30 percent of the cost of alternative energy equipment installed. Use IRS Form 5695, Residential Energy Credits to claim your credit.