DC Homeowner Tax Deductions 2014

DC Homeowner Tax Deductions

DC Homeowner Tax Deductions 2014

Tax season is beginning and DC homeowners should be aware of changes that may affect their returns. Here's the basic list of homeowner tax deductions for those filing 2013 returns in 2014:

Mortgage Interest

  • The homeownership cash cow at tax time! Approximately $100M is saved each year in the US with the deduction. Applies to primary and secondary residences when the loan amount is lower than $1M. You must itemize to receive the deduction, which is especially valuable in the first years of a mortgage loan, when the borrower pays primarily interest.

Mortgage Loan Points

  • Discount points can be purchased by borrowers to lower their interest rates when purchasing a home, and can be tax-deductible in the year in which they're used if the return is itemized.
  • Origination points are charged by your lender as a part of loan fees. When clained in the year the loan was made, these points are deductible if the return is itemized.

If you meet all of the criteria set forth by the IRS and you itemize your deductions in the year you get the loan, you can either deduct the full amount of points in the year paid or deduct them over the life of the loan, beginning in the year you get the loan. If you do not itemize your deductions in the year you get the loan, you can spread the points over the life of the loan and deduct the appropriate amount in each future year, if any, when you do itemize your deductions.

Property taxes

  • Taxpayers who itemize may also take a deduction for their property taxes. The taxes must already have been paid to be deductible.

Home improvements

  • Capital improvements to your home are deductible when you sell your home if they increased the value of the home. Non-eligible repairs restore the component to its original condition. Those with historic DC homes do well to consider tax ramifications before making choices involved in a restoration project.

There are special rules for cooperatives. See the link below.

Expired Deductions

These deductions have expired and are not currently available for 2014 returns filed in 2015:

1. Debt Forgiveness

Those with negative mortgage equity will no longer be able to exclude primary residence cancellation of debt from their gross income. This deduction allowed struggling homeowners to exclude any debt forgiveness granted from a bank, such as in a foreclosure, when calculating their taxable income. Those receiving a mortgage loan modification or effecting a short sale after December 31, 2013 will see a much higher bill than if the modification had been completed in 2013. Those who did meet the year-end deadline can still claim the 2013 deduction.

2. Mortgage Insurance Premiums

Homeowners with less than 20% equity paying PMI (private mortgage insurance) will not be able to deduct it in 2014 as they may for 2013. 

To deduct expenses of owning a home, you must file Form 1040, U.S. Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). If you itemize, you cannot take the standard deduction.

This post is not to be considered tax advice. Be sure to check with your tax professional and review IRS resources for definitive rules on tax deductions.

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Comment balloon 0 commentsThe Isaacs Team llc • February 14 2014 10:29PM


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