Tax Advantages available to homeowners!

Here are some potential tax savings for homeowners this tax season. If you are interested in learning how not to miss these on your upcoming tax returns, please call or email us to learn how to use each to its fullest potential.

1. 2010 is the last tax filing year to benefit from a refundable “first time homebuyers’ credit” of 10 percent of the purchase price of a new home—up to $8,000. The credit is available for homes purchased before October 1, 2010 and the purchasers must have entered into a binding agreement to buy the home before May 1, 2010.

2. A refundable “repeat homebuyers’ credit” is available for purchasers who entered a contract to buy a home by April 30, 2010 and closed on the sale of the home before October 1, 2010. The credit is 10 percent of the purchase price with a limit of $6,500.

3. Homeowners can exclude up to $250,000 of gain on the sale of their homes (up to $500,000 for joint filers) if they have owned and lived in the home as their principal residence for two out of the five years prior to the sale, although a partial exclusion may be available for sales due to change of employment, health or unforeseen circumstances.

4. Homeowners may also take the interest on their mortgage indebtedness of up to $1 million as an itemized deduction. The interest can be on their principal residence and a second home/house you are trying to sell.

5. For ordinary income purposes, up to $100,000 in home-equity loan interest can also be deducted.

6. Points paid on a home mortgage loan for the purchase or improvement of a principal residence are deductible in the year paid to the extent that the points represent a customary practice in the area. Points paid on a refinancing loan must be amortized over the term of the loan.

7. Through 2010, mortgage insurance premiums may also be deducted as mortgage interest. However, the mortgage insurance had to be originally acquired on or after Jan. 1, 2007. We question the value of PMI insurance when it did little to stop the destruction of housing values in the country.

8. Homeowners are also able to take their state and local property taxes as an itemized deduction.

9. If a residence of the taxpayer is rented for fewer than 15 days during the year, the rental income is excludable from gross income and no deductions attributable to such rental are allowable. This means that if you have property for rent but are unable to rent it, you can't take a deduction for expenses of the property.

10. If a homeowner’s mortgage debt of up to $2 million on their principal residence is forgiven, as in a write-down or foreclosure, it is not treated as “cancellation of debt income.” This special relief is temporary and is available for six years, retroactively for taxpayers filing amended returns, from January 1, 2007 through the end of 2011. This exclusion from income is necessary because without it any underwater homeowner would be liable for the "income" they received (debt forgiven) if they lost their home.

11. If you own a home and installed qualifying energy-efficient fixtures and systems by Dec. 31, 2010, you may claim a 30-percent tax credit – up to a maximum of $1,500 for both the 2009 and 2010 tax years. Obama's American Recovery and Reinvestment Act of 2009 (ARRA) provides for energy tax credits applying to the installation of insulation and energy-efficient exterior windows and doors, heat pumps, furnaces, central air conditioners and water pumps. This is a tricky deduction because taxpayers often incorrectly assume that any item that saves energy is eligible for a tax deduction. The IRS guidelines are quite clear on what is deductible so you need to talk to a CPA or other tax preparer to be sure your energy efficient purchases are actually covered by the 30-percent energy credit. Did you get that? ;-)

12. A separate 30-percent credit is available to homeowners who installed alternative energy equipment such as fuel cells, solar water heaters, solar electric equipment, small wind energy property and geothermal heat pumps.