Tax season is just around the corner and many homeowners are not aware of the different deductions they can take advantage of when filing taxes. Here is a review of some of the top real estate tax deductions you can utilize on your 2013 return.
The mortgage interest you pay each month is often the largest deduction on your taxes. The interest is deductible on every property you own if you have been there for some period of time during the tax year. So, if you have a cabin up north, where you visit a few times a month, the mortgage interest for the property can be deducted.
Be cautious when taking this deduction if you rent out the property because there are restrictions on the deduction. One stipulation is you must stay at the property for a minimum of 14 days over the year.
In addition, you must calculate the percentage of the number of days you were there versus the number of days it was rented out. If the total days you were at the property is not at least 10 percent of the total days the property was rented then you cannot claim the deduction.
Another deduction individuals can still receive for the 2013 tax year is related to short sales and home foreclosures. In December, I wrote a more detailed posting about this particular tax break.
Taxpayers who lost their homes through foreclosure, a short sale or saw a reduction in their overall mortgage debt through restructuring will not have to pay taxes on that canceled debt. The relief was through the Mortgage Debt Relief Act of 2007, which expired on December 31, 2013.
I am often asked by homeowners about other real estate tax deductions for items including private mortgage insurance (PMI), homeowners insurance, and closing costs. Unfortunately, none of these expenses are deductible on your federal taxes.
Before filing your 2013 tax returns remember to contact a tax preparation expert to help you with all tax needs. Remember when it comes to real estate I am here to help you with the sale or purchase of your next home – Dave Taljonick, ReMax/Right Choice