Year End Tax Tips for Homeowners
It is not too soon to get ready for your 2016 taxes, especially provisions that apply to homeowners. You can take steps now to save money when you file next year. A little tax planning now might save you a lot in a few months.
Most of the tax benefits available to homeowners are deductions which are available only if you choose to itemize your deductions rather than take the standard deduction. Now would be a good time to make an initial assessment as to whether you plan to itemize or not. Below are the standard deduction amounts for 2016. If you think your itemized deductions—including charitable giving, state taxes. Losses due to theft of casualty and medical expenses as well as real estate related deductions—exceed the numbers below, you should plan on itemizing. If you bought or sold a house or refinanced your mortgage in 2016, you may qualify for more deductions than you would in a normal year.
|Married Filing Jointly||$12,600|
|Married Filing Separately||$6,300|
|Head of Household||$9,300|
Here’s are some of the more common deductions and credits available to homeowners, with tips on steps you can take now to save the most on your 2016 taxes.
Mortgage Interest Deduction
You can deduct the interest you paid on your mortgage during the year, including points that you might have paid when you took out a mortgage to buy a home. You can deduct the interest on up to one million dollars of home mortgage debt, and you can also deduct the interest on up to $100,000 of home equity debt, even if you do not use the money for home improvements. You can take the mortgage interest deduction on second homes and vacation homes as well as long as you do not rent them out for more than 14 days during the year.
Fixed rate mortgages are structured, so you pay more interest in the earlier years of the term, so your MID decreases over time.
End-of-year tip: Make your January mortgage payment in December so that you can deduct an additional month’s worth of interest on your 2016 taxes.
You can also take the mortgage interest deduction on points and interest you pay when you refinance.
You can also deduct your mortgage insurance payments along with your mortgage interest if your insurance contract was issued after 2006. However, once your adjusted gross income (AGI) exceeds $100,000 on a joint return ($50,000 for married filing separately), the deduction is reduced.
End of year tip: Pre-pay your January premium in December so that you can deduct in on your 2016 taxes,
You can deduct all state and local property taxes you paid in 2016. If you bought or sold a home during the year, often property taxes are pro-rated based on the closing date. Check your records to see how much property taxes you paid at closing.
End of year tip: If your lender pays your property taxes for you, check your escrow statements for the past year to find out exactly how much property tax you paid in 2016.
If you have sold a home in the past year, you can claim up to $250,000 of profit ($500,000 on a joint return) without paying capital gains on it. When you sell, you will be required to pay taxes on profit that exceeds those amounts.
End of year tip: Keep meticulous records every year on expenses that will increase you are the cost basis for your home and lower the profit for tax purposes when you eventually sell. Those records should include what you originally paid for your property, plus settlement or closing costs, such as title insurance and legal fees, as well as what you later shell out for improvements, such as adding a room or paving a driveway. Don’t include routine repairs or maintenance that add nothing to a property’s value.
Solar Energy Credit
Homeowners who installed residential solar systems in 2016 can take a 30 percent tax credit. This credit applies whether you itemize or take the standard deduction, but you must pay for the installation in calendar year 20016 to take the credit on your 2016 taxes.