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Four Ways To Turn Home Deductions Into Tax Savings

  Sanjiv Gupta CPA  Published 
Four Ways To Turn Home Deductions Into Tax Savings

Owners of homes must know the tax rules fully so that they can use the deductions to the fullest extent possible. A lot of tax savings can be made from the deductions available and it can be of immense help when the actual time arrives to pay the taxes.

Mortgage points

The interest rates in the year 2011 were at an all-time low, and this encouraged many people to buy homes in the US. When the mortgage was established, the lender charges the buyer with some mortgage points. Every point that the buyer paid is equivalent to one percent of the mortgage amount. These points can be claimed for tax deductions in the year in which the tax is actually paid.

These reduced interest rates motivated house owners to refinance the mortgages that already existed. The points paid on a refinance scheme can also be claimed as tax deductions by the buyer. The point to be noted in the refinance scheme is that these points can be deducted all together when a purchase is made.

Real Estate Taxes

A few deductions can be claimed only once, whereas few other deductions are recurring. These are ongoing and can be claimed all through the life of a property. Real estate taxes are good examples of continuous deductions. These taxes are qualified for deductions from the main income tax that the owners pay. The best feature is that these taxes can be deducted for all the years that the home is owned.

Seller costs

2011 also saw a huge increase in the selling of residential properties. The owners opted to sell their present residences to either upgrade or downgrade their primary source of residence. This year was the perfect time to do renovations as interest rates were at a record low and the purchase prices were at an all-time bottom. A seller had to incur lots of expenses like the agent’s commission on real estate properties, advertising and marketing fees, and fees when a new mortgage is established by the buyer. However, the good news to the seller was that all of these expenses qualified for the full tax deductions, thereby reducing their burden to a great extent.

Mortgage interest

Mortgage interest is an example of a continuous or ongoing deduction that a homeowner can enjoy. In the initial years of owning the home, the mortgage interest is high; hence one can enjoy higher tax deductions. The full interest that is paid for the entire tenure of the property gets qualified for the full tax deductions

These are a few examples of making home expenses as effective tax-saving tools. One must be fully aware of residential tax properties, especially when one owns residential properties. This is the best way to maximize the benefits of IRS schemes. This is a way to offset the huge amount invested in buying property. The IRS always suggests using a professional tax advisor to help in matters of the tax savings so that one can get the optimum benefits.