Hey there, homeowner! We’re happy you’ve got a slice of the American dream, and you’ll get the tax breaks that go along with it. In fact, some of these tax incentives apply to even a second home. Ooh la la!
Whether you bought, sold or just happily lived in your home this year, we’ll walk you through all the tax stuff you need to know.
Just skim the “If you …” headers to find the sections that affect you.
The Nuts and Bolts
IF YOU PAID INTEREST ON YOUR MORTGAGE …
You should have received a form 1098 from your lender, which will tell you how much mortgage interest you paid. You can deduct 100% of your mortgage interest and property taxes, as long as your loan is less than $1 million, ($500,000 if you are married and filing separately). If it’s over that, the IRS will limit your deduction. But here’s the catch: You have to itemize in order to claim the deduction. This is a choice that takesa little math and thought. But basically, you calculate your total itemized deduction, compare it against the standard deduction and then take the higher deduction.
You can also deduct late payment charges (please don’t consider this an incentive to pay late) and pre-payment penalties.