I’m sure most of you out there dread April 15th as much as I do. Long lines at the Post Office, endless paperwork of filing taxes, and some people may even have money they still have to pay to the government. I wanted to make sure that all of you out there do as much as you can to deduct all of your eligible real estate expenses. A lot of people aren’t aware that owning real estate can significantly affect the taxes you owe. So even though the housing market has seen better days, there are some benefits to being a homeowner. Please remember to always double-check with a Certified Public Accountant prior to filing your taxes.
The first possible deduction is mortgage interest. Any interest you pay, no matter what the rate, is eligible. You can also deduct any late payments to the mortgage company and any prepayment penalties you’re charged for paying your mortgage down early (if you are charged). You should receive a statement from your lender giving you the total mortgage interest paid over the past year.
If you bought a home this past year and you had to pay points to the lender to obtain the mortgage, that is deductible. If the word “points” wasn’t used but terms like “loan origination fees,” that also qualifies. These points are only deductible in the year they were actually paid.
Many Lake County and Cook County, IL residents will be happy to know that their real estate property tax is deductible. If you escrow your property taxes with the lender, the amount you paid over the past year will be included in the statement you receive detailing the total insurance. If you pay separately, you can most likely view cancelled checks, or check with the tax assessor’s office for your county. This information is also available online in Illinois where you can just enter your PIN number for your home or property address. While the actual taxes are a deduction, any private services to the utility companies you use like electricity or trash removal is not.
Another deduction to keep in mind is for home improvements. You’ll want to discuss these with your CPA because a lot of improvements you make to save energy can offer you back a tax credit. Some of these include new windows and energy efficient appliances.
Some common items that are not deductible include premiums you pay for homeowners insurance, homeowners association fees, utility payments, and the principal you pay on your mortgage. Again, please verify everything with a CPA. More information can be found on the TurboTax site here.
Please visit me online for any real estate matters I can assist you with.