How to Make the Most of Your 2017 Home Tax Deductions

    You’re probably beginning to gather all of the forms, documents and receipts you need to begin work on your taxes (or to give to someone else to work on your taxes!) Federal income tax deductions are based on things you have paid for throughout the year that qualify to be subtracted from your income in order to lower your adjusted gross income, on which your tax bracket and resulting taxes are based. For example, if you made $90,000 this year but paid $16,000 on mortgage interest and property taxes, your new taxable income would be $74,000 and you would only pay taxes on this amount of income. This could potentially save you thousands! Here’s how home tax deductions could work in your favor:

    – When you buy a house, both loan discount points and origination fees are tax deductible to the buyer in most cases, even if the seller pays for your closing costs. Origination fees of more than 1% are very common today and can add up to big savings for you!

    – You can deduct interest you pay on your mortgage loan if your loan does not exceed $500,000 if you’re a single taxpayer and $1 million if you’re filing jointly. This includes a loan you acquired to make improvements to your home. This deduction can especially be beneficial on the front end of your loan if you have a 30-year loan because the first few years are usually heavy on interest with very little money going to your principle.

    – You should deduct property taxes you pay every year, even though your mortgage company is the one technically paying them out of your escrow account. Depending on where you live and how much you pay in property taxes, this could equal a large amount of money each year.

    – If you’re a freelancer or self-employed and do some business out of your house, you can deduct utilities, insurance and other expenses. To do this, you’ll add them up and prorate them based on the size of your home office in relation to the size of the rest of your home.

    These are the main home deductions you might be able to take advantage of this year, but it’s always best to consult with a tax expert who can help you squeeze every last benefit out of your home ownership!

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