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Tax Preparation and Home ownership is one of the most rewarding experiences, but it comes with a lot of upfront costs. The IRS offers several tax breaks to make homeownership more affordable. To claim these deductions, you must itemize your deductions instead of taking the standard deduction. Mortgage interest and property tax are two common home-related deductions. Private Find more information mortgage insurance premiums could also save you money.

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Mortgage interest payments make up an important portion of most monthly homeowner payments and can provide a tax break when itemizing returns instead of taking the standard deduction, offering greater tax breaks overall. In order to receive the full benefit, homeowners will need to take the time to claim it. Unfortunately, however, this benefit doesn't happen automatically--they must take the initiative themselves in claiming this deduction! It requires more work but will provide larger tax breaks.

According to the IRS, mortgage interest is only deductible if it's paid on debt used to purchase, build, or substantially improve a primary or second home. This can include refinancing debt secured by either your primary home or second home and home equity loans and lines of credit that serve the same purpose; only interest on improvement-related debt meets certain tests (like adding square footage or changing use).

Mortgage points are upfront fees charged by lenders in order to reduce your interest rates and therefore decrease monthly payments. They can also be deducted on Schedule A, as pre-paid interests. To qualify, your effective interest rate must be reduced by at least 1%.

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Property taxes are one of the main expenses that come with owning a home. While these taxes may seem costly, they're tax deductible and can help offset some of the high cost of homeownership in certain regions. To take advantage of the deduction, homeowners must itemize and exceed their standard tax deduction.

Homeowners who itemize can also deduct state and local income, property and sales taxes. The combined limit is $10,000 ($5,000 for married filers filing separate returns) of state and local taxes. This does not include transfer taxes or homeowners associations fees, which are typically included in closing costs deductions.

You may be able to deduct expenses if you use a part of your house for business purposes, such as a studio or office. This deduction applies to single-family houses, townhouses, apartments, condos and co-operative apartments - even mobile and manufactured homes!

Tax deductions may be available for medically necessary home improvements, such as grab bars in the bathroom or wheelchair ramps. You may also benefit from energy efficient upgrades like solar panels or wind turbines; however, in order to take advantage of this deduction you must obtain a letter from your physician certifying the improvement as medically necessary.

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The IRS allows you to deduct certain expenses related to a home office. There are two methods you can use for claiming the deduction: regular and simplified. Ultimately, how much of your home is dedicated as an office depends on whether it meets all requirements for deduction (refer to IRS Pub 587: Business Use of Your Home for details).

To qualify for the home office deduction, an area in your home that is used exclusively and regularly to conduct your business or treat patients or clients must be designated as such. It could be any room, an area within a room or even an outlying structure such as a shed, garage or guest house - even an entire structure on your property!

For simpler calculations, you can use the simplified method. Just keep receipts of any furniture, appliances, or equipment specifically purchased for the office.

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When purchasing a home with a mortgage loan, the IRS allows you to deduct mortgage points you pay upon closing. Each point usually costs one percent of your loan amount and reduces your interest rate by approximately 0.25 percentage points over its lifecycle. These deductions are usually spread evenly over the loan period, but under certain conditions can be deducted in one year.

It is better to itemize than take the standard deduction if you want to benefit from the mortgage point deduction. Your lender should issue you an annual 1098 mortgage interest statement which details how much interest was paid as well as an itemized breakdown of any points paid; box 6 of that document shows this figure. Property taxes paid out of escrow can also be deducted, provided that your municipality accepts this method of paying bills.

Home ownership offers you additional tax breaks. These include energy-efficient credits, deductions for home equity loan used to improve your house and meet certain standards and criteria. To qualify, improvements must meet significant and specific criteria - this could include making it accessible for people with disabilities or grading the ground accordingly.

Jackson Hewitt Tax Service

4600 Main St Unit 5,

Shallotte, NC 28470

19107548510