The summer is prime time for buying or selling a house. If you purchased a home this year, here are a few tax deductions and programs that you might be eligible for.
Deductible house-related expenses
Most people take out a mortgage to buy their home and then make monthly payments to the lender. This mortgage payment may include several costs of owning a home that can be deducted, such as:
- state and local real estate taxes, subject to the $10,000 limit.
- home mortgage interest, within limits.
It’s important to note that in order to take advantage of these deductions, you must itemize your deductions (rather than simply taking the standard deduction).
Non-deductible payments and expenses
Unfortunately, not all expenses related to owning a home are deductible. For example, you cannot deduct any of the following:
- Insurance, including fire and comprehensive coverage and title insurance
- Down payments on a mortgage
- Wages paid to housekeepers and other domestic help
- The cost of utilities, such as gas, electricity or water
- Most settlement or closing costs
- Forfeited deposits, down payments or earnest money
- Internet or Wi-Fi system or service
- Homeowners’ association fees, condominium association fees or common charges
- Home repairs
Mortgage interest credit
The mortgage interest credit helps people with lower income afford home ownership. If you qualify for the mortgage interest credit, you can claim the credit each year for part of the the interest paid on your home mortgage. You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate from your state or local government. An MCC is issued only for a new mortgage for the purchase of a main home.
Homeowners Assistance Fund
The Homeowners Assistance Fund program provides financial assistance to eligible homeowners for paying some expenses related to their principal residence. The goal of the fund is to prevent mortgage delinquencies, defaults, foreclosures, utility shut-offs, and the displacement of homeowners experiencing financial hardship after January 21, 2020.
Minister’s or military housing allowance
If you are a minister or member of the uniformed services and receive a nontaxable housing allowance, you can still deduct your real estate taxes and home mortgage interest. You don’t have to reduce your deductions based on the allowance.
If you have questions about these programs and tax deductions, or if you are wondering if you qualify for any of them, please contact our office. We would be happy to help.