4 Ways to Turn Home Deductions into Tax Savings

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Your home is not only your castle, but it is also a tax savings haven. Homeowners enjoy tax deductions that non-homeowners don’t. Make sure that you are using your home to the fullest when it comes to tax deductions. It’ll save you a lot of money, blood, sweat and tears when tax time rolls around every year.

Mortgage Points

Record low interest rates in 2011 led many people to finally realize the American dream of homeownership. When you established your mortgage, the lender most likely charged you points. Each point you paid is one percent of your mortgage amount. These points are tax deductible for the tax year in which you paid them.

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Record low mortgage interest rates also enticed many homeowners to refinance existing mortgages. Points that you paid on a refinance are also tax deductible. The difference is that you can deduct the points over the life of the loan on a refinance but all at once on a purchase.

Real Estate Taxes

While some tax deductions are one-time events, others are ongoing benefits of owning a home. Real estate taxes, or property taxes, are one of the ongoing tax deductions you enjoy as a homeowner. Your real estate taxes are fully tax deductible from your federal tax returns. You can deduct the property taxes for each tax year that you own the home.

Seller Costs

Another abundant action in 2011 was the selling of homes. Many homeowners chose to sell their current home to upgrade or downgrade their primary residence. At record low rates and purchase prices, it was prime time make the change. As a seller, you also incur costs, such as a real estate agent commission, marketing fees and fees the seller is responsible for paying when the buyer establishes a new mortgage. All of these fees are also tax deductible.

Mortgage Interest

Another ongoing deduction is the interest you pay on your mortgage. Generally, the mortgage interest is fully tax deductible. For each year that you own the home, the mortgage interest is tax deductible. Since you pay more interest in the first few years you have the mortgage, the first few years will have higher tax deductions than the latter years of a mortgage.

[Mortgage Help: Get your free credit report and see if your credit score is mortgage qualified]

Homeownership comes with several benefits. One of the biggest benefits is the ability to write off a variety of costs from your federal tax returns, which equates to a great deal of tax savings for you.

See the latest mortgage rates and go into your next buy knowing where you can leverage your ownership to save on taxes.