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General Tax Breaks include Real
Estate Taxes, Home
Mortgage Interest Deductions, and Points!
Take advantage of standard tax
breaks available to you!
Deducting Real Estate Taxes, Home Mortgage Interest, and
Points on your tax return will reduce your tax liability.
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As a homeowner, you have
the ability to take advantage of several
"routine" deductions available to you by the IRS. These
deductions
have been called "plain vanilla deductions" but don't
let the name fool
you. If you are a homeowner, proper tax planning
required a
understanding of these fundamental tax deductions and
the rules
behind them. The general tax breaks available to you, the
homeowner,
are real estate taxes, home mortgage interest, and
points.
This section of the website will explain the basic tax breaks available
to you and how you can take advantage of them. We will also
demonstrate how you can increase these deductions in certain
scenarios.
Tax Breaks for all Property Owners
-
Real estate tax - also known
as property tax, this is the
annual tax that most state and local governments charge on
the value of real property.
-
Mortgage interest - Most
homebuyers take out a mortgage
(loan) to buy their home. They then make monthly
payments to either the mortgage holder or someone
collecting the payments for the mortgage holder. A portion
of your payment actually repays the debt and another
portion pays the interest on the loan. You can usually
deduct the entire part of your payment that is for mortgage
interest if you itemize your deductions.
-
Mortgage Points
- Lender fees associated with getting a mortgage.
Each point equals 1% of the loan principal. One to three
points are common on many home loans, which can easily
add up to thousands of dollars.
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Sidebar |
Again, you can deduct
your real estate taxes and home mortgage
interest payments only if you itemize your deductions instead
of using the standard tax deductions available to you. Most
homeowners who pay real estate taxes and home mortgage interest
will pay less income tax if they itemize their deductions as opposed
to taking the standard IRS deduction. When in doubt, discuss with
your accountant!
3% Phaseout Rule
Your home mortgage interest deduction and real estate tax
deductions are limited if, in 2006, your
adjusted gross income
exceeds $150,500 ($75,250 if married filing
separately). If this is the
case, your
deductions are subject to the 3% reduction of itemized
deductions.
Learn about the 3% rule here
Residential Energy
Efficient Property Credit
You may be able to take a
credit of 30% of your costs of qualified solar
electric property, solar water heating property, and fuel cell property.
This
includes labor costs properly allocable to the onsite preparation, assembly,
or original installation of the property and for piping or wiring to
interconnect
such property to the home. This credit is limited to:
- $2,000 for
qualified solar electric property costs.
- $2,000 for
qualified solar water heating property costs
- $500 for each
one-half kilowatt of capacity of qualified fuel cell property
for which qualified fuel cell property costs are paid.
To learn about solar tax credits and
solar tax requirements click here.
Sales Taxes
Generally, you can elect to deduct state and local general sales taxes
instead of state and local income taxes as an itemized deduction on
Schedule A (Form 1040). Deductible sales taxes may include sales taxes
paid on your home (including mobile and prefabricated), or home
building materials if the tax rate was the same as the general sales tax
rate.
Note that if you elect to deduct the sales taxes paid on your home, or
home building materials, you cannot include them as part of your cost
basis in the home.
Click here to leave general tax breaks and return to
real
estate owner main
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