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Homeowners!! These little-known tax deductions can save you Thousands!

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Homeowners!! These little-known tax deductions can save you Thousands!

Hey, Homeowners! These Little-Known Tax Deductions Can Save You Thousands

You probably already knowthat owning a home comes with some sweet tax benefits, like the mortgage-interest and property-tax deductions. But did you know theres a whole list of other homeowner-related tax breaks that you might be leaving on the table?

Were not talking chump change, either.Homeowners already save an average of $3,000 a year in taxes from mortgage-interest and property-tax deductions, according to the National Association of Realtors. When you add in some of the lesser-known homeowner tax breaks, you could really be amping up the savingsand beating the IRS at itsown game.

Back in December,Congress passed theProtecting Americans From Tax Hikes Act of 2015, which extended many exemptions that were about to expire and made others permanent.But to reap the benefits, you first have to know about them.

So, here we go! Check out these commonand not-so-commonhomeowner deductions that you shouldtake advantage of this year:

1. Mortgage interest deduction

If youve taken out a loan to buy a house, you candeduct the interest you pay on a mortgage, with a balance of up to $1 million. To access this deduction, you will have to itemize rather than take the standard deduction. The savings here can add up in a big way. For example, if youre in the 25% tax bracket and deduct $10,000 of mortgage interest, you can save $2,500.

Of course, there are some limitations. For example, if youre helping a family member pay his or her mortgage, you cant deduct that interest on your tax return.

2. Private mortgage insurance

Qualified homeowners can deduct payments for private mortgage insurance, or PMI, for a primary home. Sometimes youcan take the deduction for a second property as well, as long as it isnt a rental unit. Heres the catch: This only applies if you got your loan in 2007 or later.

Another restriction:This deduction only applies if your adjusted gross income is no more than $109,000 if married filing jointly or $54,500 if married filing separately.

3. Property taxes

Please, Mr. Postman

Send me news, tips, and promos from realtor.com and Move.

Youcan include state and localproperty taxesas itemized deductions. An interesting note: The amount of the deduction depends on when you pay the tax, not when the tax is due. As a result, paying property taxes earlier could have a positive impact on your return.

4. Capital gains on a home sale

The dreadedcapital gains taxcan be avoided whenthe gain from selling your personal residence is less than $250,000 if you are a single taxpayer or $500,000 if you are a joint filer. To qualify, youmusthave owned and used thehome as aprimary residence for at least two years out of the five years leading up to the sale.

5. Medical improvements

If youve made improvements to your home to help meet medical needs, such as installing a ramp or a lift, you could deduct the expensesbut onlythe amount by which the cost of the improvements exceed the increase in your homes value. (In other words, you cant deduct the entire cost of the equipment or improvements.)

A lot of this comes down to fact and circumstance, saysGil Charney, director ofThe Tax Institute at H&R Block. For example, if youve recently installed a heated therapy spa or hot tub in your home, you may be able to deduct the expense if theres also evidence that, say, a physical therapist visits your home three times a week and youre over a certain age.

6. Home office

If you have a dedicated space in your home for work and its not used for anything else, you could deduct it as ahome office expense.

It doesnt have to be an entire room, Charney says. It can just be a dedicated space.

7. Renting out your home on occasion

If yourented out your homefor, say, a major sports event like the Super Bowl or the World Series, or a cultural event such asMardi Gras, the income on the rental could be totally tax freeas long as it was for only 14 days or fewer throughout the course of a year.

8. Discount points

Discount points, which are paid to lower the interest rate on a loan, can be deducted in full for the year in which they were paid. In addition, if youre buying a home and the seller pays the points as an incentive to get you to buy the house, you can deduct those points, Charney explains.

9. Energy-efficiency tax credit

Youcan take advantage of anenergy-efficiency tax creditof 10%of the amount paid (up to $500) for any green improvements, such as storm doors, energy-efficient windows, and air-conditioning and heating systems.

10. Loan forgiveness deduction

If youre the owner of a foreclosed or short-sale home, youcan take advantage of mortgage-debt forgiveness. For example, if you makea short sale of yourprimary home at $250,000 but owe $300,000 on yourmortgage, the lender will forgive the extra $50,000 owedand you dont have to pay taxes on that amount.

For more tax tips, check out IRSPublication 530for a list ofwhat homeowners can (and cannot) deduct.