Introduction
Home buyers assume the standard income tax deduction every year that is higher than the tax amount paid by people who itemize. While going for the standard deduction, most home buyers overlook deductions from their income which is taxable such as improvements of energy competence, unclaimed mortgage points, moving costs etc. If home buyers inquire about available deductions and complete important forms from the Internal Revenue Service, then a great deal of tax liability can be lowered.
Have you made any energy-based improvements to your home? You can get the amount back in the form of a dollar-for-dollar tax credit. Such expenses are deductible and if your renovation meets government-fixed energy standards, such as energy efficient doors and windows, then you will be permitted for a tax credit of 10 percent of the cost up to a maximum amount of $500. Maximum credit given for windows is $200 and other limitations include a lifetime maximum credit of $500. This is valid from 2006 to 2011. When home buyers claim $500 or more in early years, all new renovations are ineligible.
Financial organizations consider prepaid mortgage interest as points. This means, 1 point in terms of them is equal to 1percent of the loan. The points that home buyers pay for their first mortgage are come under the list of deduction in the tax year. If people pay any points to refinance their mortgage, then they can also deduct the same. However, they must divide their deduction equally throughout the mortgage life term. For example, points that gave to refinance a mortgage of 20 years must be deducted equally throughout 20 years. If home buyers refinance their mortgage again with another lender, then they may deduct any un-deducted points from the early mortgage during the year they renew the financing.
Did you move because of your job? Then you may be able to apply for a tax deduction for your moving expenses. However, one thing to remember is your new job location should be at least 50 miles away from your previous home. If you are a qualified person, that means your job location lies in the required distance, then you can deduct expenses such as mileage and tolls from your income tax. Form 3903 is used to estimate your moving expenses deduction.
Next is the home office deduction in which homebuyers are able to apply for a tax deduction if they use part of the first residence as a business. If the home is regularly used as a meeting place for customers and clients, then it is eligible for tax deduction. It is considered as separate structures even it belongs to the same property. No matter if you are a self-employed person. you may be using part of your home for business thus, eligible for deduction.
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