DID You Own A Home In 2019
Home Loan Interest Deduction
What is the home loan interest deduction? Need help filing your taxes? Book an online appointment
One great benefit of home ownership is that you can deduct the home loan interest you paid for your primary home (the home where you live) and for a second home (like a vacation home). You can also deduct eligible interest you paid on a home equity loan. In addition, if you paid points to obtain a home loan, you can deduct this expense as home loan interest because points are considered prepaid interest.
Refinancing Your Home
When you refinance your home, you can usually deduct the entire amount of interest you paid on the loan you got to refinance.
However, with a refinance loan, you can’t deduct the portion of interest you paid on the new loan balance that is more than your old mortgage balance unless the excess was used to buy, build or substantially improve a principal residence or second home. The excess loan interest amount may also be deducted if the debt qualifies as a home equity loan and your total home equity debt is less than $100,000 ($50,000 for married couples filing separate returns).
You can also deduct interest you paid on the old loan before you refinanced. Need help filing your taxes? Book an online appointment
What is mortgage insurance?
Mortgage insurance is an insurance policy you pay for that protects your lender in the event that you are unable to make your mortgage payments. If you default on your loan, mortgage insurance reduces or eliminates losses to lenders.
Generally, you will be required to pay for mortgage insurance when you have less than a 20% down payment for your property. The premium you pay for this insurance can be tax deductible.
Mortgage insurance premiums must be paid until you own more than 20% of your main home. Generally, you will reach this point in seven years (84 months).
Mortgage insurance is not the same thing as homeowners insurance (also known as property insurance or hazard insurance). Examples of homeowners insurance include coverage in case of fire, flood, theft, etc. Homeowners insurance is not deductible.
Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. If provided by the Rural Housing Service, it is commonly known as a guarantee fee. The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. These fees can be deducted fully in 2019 if the mortgage insurance contract was issued in 2019. Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Need help filing your taxes? Book an online appointment
What is the mortgage insurance premium deduction?
The mortgage insurance premium deduction allows you to deduct:
– The premiums paid for private mortgage insurance (PMI)
– The fees you paid for mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, and the Rural Housing Administration
How can I get the mortgage insurance premium deduction?
You must meet the following eligibility requirements to get the mortgage insurance deduction:
– You can only deduct qualified mortgage insurance you paid in relation to your main or second home, not for other land or business real estate you own.
– You must have started the mortgage insurance contract after December 31, 2006.
– You must itemize your deductions.
– You must meet certain income requirements.
Property Tax Deduction
What is the property tax (real estate tax) deduction? Need help filing your taxes? Book an online appointment
With the real estate tax deduction, you can deduct state and local taxes that you pay for real estate property that you own, such as your home, a second home, or land.
Deductible real estate taxes, also called property taxes, include taxes paid at closing when buying or selling a home, and certain taxes paid to your town office, county, parish, or other tax assessor (either directly or through a mortgage escrow account) on the assessed value of your property or property in your taxing location.
Is there a limit on my income for this deduction? Need help filing your taxes? Book an online appointment
Yes. The deduction for PMI starts to phase out once your Adjusted Gross Income (AGI) reaches $100,000, or $50,000 (married filing separately).
The deduction for PMI disappears entirely when your AGI reaches $109,000, or $54,500 (married filing separately).
What paperwork do I need for the mortgage insurance premium deduction?
Your qualified mortgage insurance is usually reported on Form 1098, Mortgage Interest Statement, box 4 or on a year-end statement from your mortgage company.
If you’re not sure what you paid for mortgage insurance, check with your lender or the mortgage insurer.
Home Energy Credits
What are the residential energy credits? Need help filing your taxes? Book an online appointment
The Residential Energy Credits for 2019 consist of the non-business energy property credit and the residential property credit.
Important: If less than 80% of the use of an item is for non-business purposes, you can claim only the personal use portion of the costs to determine the credits. For example, if your business usage of the doors and windows you installed is 82%, then you can claim only 18% of the cost of these items when determining your credit.
Don’t forget to reduce your purchase price of any energy-efficient property by the amount of a subsidy you received from a public utility for the purchase of the equipment. If you include the subsidy in your income you don’t have to make this adjustment.
Non-business Energy Property Credit equals 10 percent of what a homeowner spends on eligible energy-saving improvements , up to a maximum tax credit of $500 for the combined years since 2006. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items.
In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count. By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $500 on his or her 2019 federal income tax return.
Note:Due to limits based on tax liability, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result.
Residential Energy Efficient Property Credit The residential energy efficient property credit, equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when calculating this credit. Also, no cap exists on the amount of credit available except in the case of fuel cell property. Qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property.
Not all energy-efficient improvements qualify for these tax credits. For that reason, homeowners should check the manufacturer’s tax credit certification statement before purchasing or installing any of these improvements. The certification statement can usually be found on the manufacturer’s website or with the product packaging. Normally, a homeowner can rely on this certification. The IRS cautions that the manufacturer’s certification is different from the Department of Energy’s Energy Star label, and not all Energy Star labeled products qualify for the tax credits.
Eligible homeowners can claim both of the residential energy credits when they file their federal income tax return. Because these are credits, not deductions, they increase a taxpayer’s refund or reduce the tax he or she owes.
Note: Keep in mind, these are not refundable credits, which means you can take the credit up to the tax owed. There is no refund of any credit amount left over.
Further information on these credits can be obtained in IRS Form 5695. This form and more information can also be obtained through IRS.gov
Do I qualify for the residential energy credits? Need help filing your taxes? Book an online appointment
Eligibility requirements
– Qualifying improvements had to be installed in your main home. Your main home is the property you live in the majority of the time.
– Your main home must have been located in the United States.
Eligible homeowners can claim both of these credits when they file their 2019 federal income tax return. Because these are credits, not deductions, they increase a taxpayer’s refund or reduce the tax he or she owes.
Homeowners should check for the following:
– the manufacturer’s tax credit certification statement before purchasing or installing any of these improvements (usually found on the manufacturer’s website or with the product packaging. NOTE: The credit certification is for your records and NOT sent to the IRS.
– the IRS cautions that the manufacturer’s certification is different from the Department of Energy’s Energy Star label, and not all Energy Star labeled products qualify for the tax credits.
Limitations of this credit
– Energy-efficient improvements made to second homes or vacation homes do not qualify.
– You must have owned the home — improvements made to a property that you rented from someone else do not qualify.
– You cannot take this credit for equipment used to heat a swimming pool or hot tub.
– This credit is nonrefundable, which means the credit amount you receive will not exceed the amount of tax you owe. Therefore, there is no refund.
Example: If you owed $375 in taxes, but you received a nonrefundable credit of $500, the tax you owed was reduced to zero, and the remaining $125 was lost. You would not receive a refund for the remaining $125.
Special circumstances or exceptions
– If you made improvements to a multiple dwelling unit (that is, you own a property and live in just one of the units), you could have claimed this credit for the portion applicable to your main home.
Labor Costs
– You can claim the credit only after the original installation is completed.
– Most of the labor costs allocated for Non-business Energy Property and Residential Energy Efficient Property may be included, except energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs.
– This includes onsite preparation, assembly, or original installation of the property, and piping and wiring used to connect the energy efficient property to the home.
What paperwork do I need for the residential energy credits? Need help filing your taxes? Book an online appointment
– If you qualify, These credits are claimed on Form 5695.
– To claim this credit, refer to your receipts for purchases of energy-efficiency improvements and property. You don’t need to include these with your return.
Homeowners should check for the following:
– the manufacturer’s tax credit certification statement before purchasing or installing any of these improvements (usually found on the manufacturer’s website or with the product packaging.
– the IRS cautions that the manufacturer’s certification is different from the Department of Energy’s Energy Star label, and not all Energy Star labeled products qualify for the tax credits.
– It’s important to keep your receipts for the energy-efficient improvements that you made because any residential energy credits on your return will be used later to help determine gain or loss on the sale of your home.
Deductions and credits related to the residential energy credits
-Eligible homeowners can claim both Non-business Energy Property Credit and Residential Energy Efficient Property Credit when they file their 2019 federal income tax return. Because these are credits, not deductions, they increase a taxpayer’s refund or reduce the tax he or she owes.
– Many states offer similar energy-related credits, including Arizona, Hawaii, Indiana, Kentucky, Massachusetts, Montana, New Mexico, and Oregon. Contact your state tax agency to learn more. Need help filing your taxes? Book an online appointment