As a homeowner you’re entitled to valuable tax breaks from the government:
You
can deduct mortgage interest on your federal tax
return, and often from your state tax return as well.
Property
taxes are fully deductible on your federal tax return.
You
may be able to exclude
capital
gains on the sale of your home on your tax return.
Deductible mortgage interest
If you take a
mortgage
to pay for your primary
or secondary home, you can deduct the
interest
on your tax return.
The deduction applies whether it’s your first or second mortgage,
a home improvement loan, or a home equity loan, though there may
be some restrictions on how much you can deduct. You should discuss
your particular situation with your tax adviser.
If you prepaid interest on your loan as
discount
points
at the time of purchase, you can deduct their
value. The general rule is that you cannot deduct the total amount
of your prepaid interest the year you buy. But there are a number
of exceptions you may qualify for. Check IRS Publication 530,
or ask your tax adviser.
Mortgage interest credit
If you are a lower-income homeowner, you
may be qualified to claim a tax credit for some of the mortgage
interest you pay. If you think you may be eligible but did not
receive a mortgage credit certificate (MCC) from your state or
local government, contact the housing finance agency in your area
before you buy or take out a mortgage.
If you buy a
co-op,
you probably
qualify for the same tax treatment as other homeowners and can deduct
your share of the corporation’s real estate taxes.
Costs you can't deduct
Insurance premiums, including mortgage and title insurance Real estate depreciation Utilities, including gas, electricity, and water Most settlement costs Wages for domestic help
