Tax Credits for the Homeowner

Tax season is almost upon us. It is one of the best times to think about all of the homeowner tax credits that are available to you. It’s just about tax season. During tax season, it’s time to start thinking about tax credits. If you own a home or are considering buying a new home, you should know about the potential tax credits that are available for home owners.

There are four main areas that homeowners should remember when they’re filling out their tax returns. Those four items are:

• Points
• PMI
• Capital gains on sales
• Mortgage interest

Points are the amount of money that you lender may charge when you buy a home. This may be as much as 2% or more of the purchase price of the property. So for example, if you buy a home for $250,000 and your lender charges 1% as points, you would have to pay $2500. That money can be used as a tax deduction during that first year.

PMI is Private Mortgage Insurance. This is usually used by people who put down less than 20% as a down payment when you buy a home. If you purchased the home after 2005, the PMI can be deducted on your tax return, just like tax credits can.

Sales – This is potentially one of the biggest homeowner tax credits available today. When you sell your house, you may be entitled to a $250,000 (for singles) or a $500,00 (for couples) tax exemption from capital gains. For instance, if you are married and bought your house many years ago and sold it for a $600,000 gain, you would have to pay taxes on the $600,000 gain, However due to this $500,000 exemption, you would only have to pay taxes on $100,000 worth of capital gains. That’s a huge savings.

Mortgage interest – This is one of the most well-known homeowner tax credits. People can deduct the amount of interest that they pay on their mortgage each and every year.

Read more about tax incentives for homeowners here: http://money.msn.com/tax-tips/post.aspx?post=910c3ccc-a1c5-443c-8ec1-bde7256036c3