Owning a Southern Maryland home doesn’t come cheap, but did you know that some of your expenses are tax deductible? Find out how you can minimize the cost of owning a home by maximizing homeownership write-offs. (Please note that the information presented here is based on the 2015 tax year.)
You can deduct all the mortgage interest payments you make on your home. This applies not only to your home equity line of credit (such as on a loan worth up to $100,000) but also to a second mortgage. If you own another home, such as a mobile home or vacation cottage, you can deduct the mortgage interest for that home as well, provided you stay there for at least 14 days a year or 10 percent of the duration it is rented out.
Mortgage Points and Insurance
You can also deduct the mortgage points for your home in the same year you pay them. These are the points you pay on your mortgage. Additionally, you can also deduct the points you pay for a home equity loan. It is worth noting that points paid to refinance a home mortgage should be amortized based on the length of the loan. You can also deduct premiums you pay for private mortgage insurance on your loan, provided you earned less than $109,000 in 2015.
It seems a bit strange, but you can also deduct tax payments on your taxes. The Southern Maryland property tax payments you make are deductible expenses. Always keep your property tax bills as well as proof of statements because you never know when you will need them.
Do you run a home-based business? You may qualify for a home office deduction. There are a few conditions that you need to fulfill, however, to qualify for this deduction. Your home should be the primary place you run your business and the office space should only be used for work.
There are two ways of calculating your deduction. The simple option is to deduct $5 per square foot up to a maximum of 300 square feet, and this applies only to your home office area. A more advantageous yet complex method involves dividing your office’s square footage with that of your home, yielding what is known as a “business percentage.” The business percentage is then multiplied by allowable home costs, such as mortgage interest and utilities. The final result is the deductible amount.
If you’ve made energy-efficient improvements, you may earn a credit of up to 10 percent of the cost of the improvements, up to $500 maximum. This covers expenses such as new doors and windows, insulation, and high-efficiency heating and cooling systems. Renewable energy systems such as solar power can earn you a credit worth 30 percent of the total cost. State credit could also be available for these items.
Medical Home Improvements
If a medical condition forces you to make home improvements – such as an air filter for allergy sufferers or a stair lift for someone with arthritis – you can write off some of the expenses as part of your medical deductions. Be aware that it is only possible to deduct the portion of your medical costs exceeding 10 percent of your newly adjusted gross income (7.5 percent for those aged 65 and above).
In most cases, the difference between equipment cost and the increase in home value from the improvement is the only amount you’re allowed to deduct. Some improvements, including widening doorways to accommodate a wheelchair, don’t add any marketable value to a home but are deductible provided you meet specified income requirements.
If you sold your home less than a year ago, you may be eligible for a certain amount of tax savings from the transaction itself. The title insurance, advertising, and real estate agent’s fees are all deductible expenses. Furthermore, you can deduct improvements you made to your home so that you could sell it provided you have a taxable capital profit from the sale.
If your home was damaged by fire, weather, theft, or any other disaster, you have suffered a casualty loss, which may be deductible. If your cumulative loss was greater than 10 percent of your income and wasn’t covered by insurance, you are eligible to deduct the loss. However, you ought to be in a position to document the total value of what was lost.
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