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8 Great Homeowner Tax Deductions

Posted by admin on April 3, 2015
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Owning a home is the ultimate symbol of financial security. So congratulations on achieving this milestone! The realtors at Prudential Beazley Real Estate find it rewarding to help buyers find the homes of their dreams in the Augusta, GA and Aiken, SC metros. This time of year, we’re happy to remind our clients that buying a new home isn’t all about digging deep into your pockets. There are state and federal incentives for homeownership that will make you extra glad you made the investment!

Related: Using Your Tax Return as Down Payment on New Home

Mortgage Interest


The deduction of mortgage interest paid is often the biggest tax break for homeowners. You may deduct up to $1 million used to buy or improve a home. You can find the total interest paid on your home last year on Form 1098 provided by your mortgage lender.



Some buyers pay “points” (1 point = 1% of the loan amount) to borrow a mortgage, home equity loan, or to refinance. Lenders charge points to make a profit, but you can deduct these payments at tax time if paying points is a standard practice in your area and the points charged are fair market value. (Usually the points paid equal the downpayment.) You can find points paid on Form 1098 or in your closing documents. You’ll need to spread the cost of the points over the lifespan of your mortgage, so you won’t see all the savings this year, but it can add up to thousands of dollars saved in the long run.

Related: The Ability-to-Repay Rule: How Does it Affect Consumers?


Local Real Estate Taxes


If you pay your tax through an escrow account, you will find this amount on a form from your lender. If you pay direct, you’ll need to look back into your record book. The year you buy your home, you usually reimburse the seller for local real estate taxes prepaid for the time you owned it, so check for that amount on your settlement sheet too. Keep in mind you can’t deduct the total amount placed in escrow, but you may deduct what is actually paid.

Private Mortgage Insurance Premiums


If your downpayment was less than 20 percent of the home’s cost, you are probably stuck paying for Private Mortgage Insurance, which is an extra fee protecting the lender if you default on the loan. To qualify for the full deduction, you’ll need to make no more than $109,000 a year. As Houselogic calculates, a $200,000 home with 5% down and $1,500 paid in PMI could equate to a $375 savings on your tax bill.

Penalty-Free IRA Payouts


Did you break into your IRA before age 59.5 to come up with a downpayment? You can withdraw up to $10,000 from your IRA without paying the 10% penalty. You can qualify for this deduction as long as the money was used to buy or build a home within 120 days of withdrawal and you have owned the home for no more than two years.

Energy Credits


Did you buy energy-efficient skylights, doors, windows, insulation, a new roof, air conditioners, heat pumps, a water heater, or a furnace last year? You can save 10% of the total cost up to $500. You can also deduct 30% of the cost of solar generators or solar water heaters.

Home Improvement Expenses


Did you pay money for landscaping, a new fence, a garage, energy-efficient updates, storm windows, room additions, plumbing upgrades, new bathrooms, kitchen work, a new deck, electrical wiring, driveway work, or a new roof? You may be able to deduct these expenses now if you work from home or rent out part of your house. Otherwise, you will have to wait until you sell the home to reap the benefits.

Tax-Free Profit On Sale


Did you sell your primary residence to move? If so, you may escape paying tax on home sale profit. To be considered “primary,” you should have lived in the home for two of the last five years. Exceptions can be made due to change of health, employment, divorce, or the birth of twins. If your profit exceeds the $250,000 limit, excess is reported as a capital gain.

Prudential Beazley Real Estate realtors are happy to answer any questions you may have about new homeowner tax deductions and go over the paperwork with you. We can also refer you to an accountant should you require one to help you obtain the maximum deductions. Call 706-863-1775 or contact us here  to meet with a knowledgeable agent.


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