Now that we are past the holiday excitement and cabin fever has set in, the annual tradition of filing our income tax returns is upon us.
Thankfully, being a homeowner can bring significant savings for most individuals. While paying the monthly mortgage or replacing that furnace can be a financial burden, you are able to reap the tax benefits when preparing your returns.
A major benefit of owning your residence is the tax deduction for interest paid on your home-related loans. The tax code allows for interest deductions on your primary mortgage, home equity loan, and private mortgage insurance (PMI). If you purchased or refinanced your home during the year, be sure to review your HUD closing statements. Many people pay loan origination fees that also provide for a deduction. Has your home appreciated in value or your local school district passed a recent levy? Your semi-annual real estate tax bill may have increased, but there is a tax deduction for that as well.
Insulating your attic or replacing your windows now won’t do anything for your 2016 return, but make sure to capture any energy-efficient home improvements installed before 12/31. Things that may qualify for the energy tax credits include heat pumps, central air systems, furnaces, water heaters, insulation, doors and windows that meet certain criteria. And if you installed a geothermal system or solar panels, a 30% tax credit may be available. That certainly helps to reduce your tax liability come April 15th.
Andy Arend is a partner with Harris, Burnett, Arend & Schmiesing CPAs located in the Worthington Hills area. The firm specializes in assisting small business owners and high net worth individuals to reduce their tax liabilities. If you have any questions about the information contained here or other income tax issues, you can reach him at firstname.lastname@example.org or 614-436-2256.