Homeownership carries many tax benefits, so be sure you’re taking advantage of these strategies at tax time:
Mortgage Interest Deduction
Interest you pay on a mortgage of up to $1 million — or $500,000 if you’re married filing separately — is deductible on Schedule A when you use the loan to buy, build or improve your home. A second mortgage, home equity loan or home equity line of credit is also eligible for the deduction.
PMI and FHA Mortgage Insurance Premiums
Deduct the cost of private mortgage insurance (PMI) as mortgage interest on Schedule A if you itemize your return. Note: the 2014 tax season is the last time you can claim this deduction for loans taken out in 2007 or later unless Congress renews it for 2015, which may happen, but is uncertain.
Prepaid Interest Deduction
Prepaid interest (or points) you paid when you took out your mortgage is typically 100 percent deductible in the year you paid it along with other mortgage interest. If you refinance your mortgage to use the money for home improvements, points you pay are also deductible in the same year.
Property Tax Deduction
You can deduct the real estate property taxes you pay on Schedule A. If you have a mortgage with an escrow account, the amount of real estate property taxes you paid shows up on your annual escrow statement.
Energy-Efficiency Upgrades
Did you make your home more energy efficient in 2014? You might qualify for the residential energy tax credit. Tax credits are especially valuable because they let you offset what you owe the IRS dollar for dollar for up to 10 percent of the amount you spent on certain home energy-efficiency upgrades.