Here's a breakdown of what tax deductions you may qualify for and how to get them.
What is deductible
If you are a homeowner you'll want to take full advantage of tax deductions. Chances are, you have a mortgage. Here's what's deductible:
state and local real estate taxes, subject to the $10,000 limit.
home mortgage interest, within the allowed limits.
Learn more here. This link has all the information that the IRS provides on this subject.
In order to deduct the costs of being a home owner, you must itemize your costs. Here is the form to itemize your expenses: Schedule A Form.
What is not deductible
Sorry, but these things are not deductible:
Insurance including fire and comprehensive coverage and title insurance
The amount applied to reduce the principal of the mortgage
Wages paid to domestic help
The cost of utilities, such as gas, electricity or water
Most settlement or closing costs (you may deduct home mortgage interest and/or certain real estate taxes. You deduct them in the year you buy your home if you itemize your deductions. You can add certain other settlement or closing costs to the basis of your home)
Forfeited deposits, down payments or earnest money
Internet or Wi-Fi system or service
Homeowners' association fees, condominium association fees or common charges
You may qualify for Mortgage Interest Credit
Are you lower income? You may qualify for the mortgage interest credit. You may be able to claim this credit if you were issued a Mortgage Credit Certificate by state or local government. A Mortgage Credit Certificate is issued only for a new mortgage for the purchase of a main home.
Typically you apply for a Mortgage Credit Certificate when you apply for the loan to buy the house. Check with your state programs because not every state offers a Mortgage Credit Certificate. According to the WSHFC - Washington state is not currently offering Mortgage Credit Certificates.
If you were impacted by the pandemic...
If you have been experiencing hardship after January 21st 2020, then you may be eligible for this fund. The Homeowners Assistance Fund program provides financial assistance to homeowners. This assistance is for paying certain expenses related to their main home to prevent mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services and also displacements of homeowners.
Ministry or Military-
If you receive a housing allowance because you are in ministry or the military you don't have to reduce your deductions based on the allowance. You can still deduct your real estate taxes and home mortgage interest.
Get more information here:
Please reach out if you have any questions!
This blog post is not a substitute for legal or financial advice and is not liable for any misinformation that may have been provided. This information has been provided by the IRS newsletter.