Colorado homeowners could qualify tax breaks | CraigDailyPress.com

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Colorado homeowners could qualify tax breaks

WASHINGTON (AP) Owning a home provides great potential tax deductions for millions of people, but many probably aren’t fully aware of every tax break they could claim. Buying and selling a home also raises a number of tax possibilities.

A key benefit of home ownership is that it allows many taxpayers to itemize a range of deductions using Schedule A instead of claiming the standard deduction $7,350 for a married couple filing jointly this year, $4,400 for a single filer giving them many more options to save on their tax bill.

For a home, the basics include loan mortgage interest, which is generally outlined in a statement from the homeowner’s lending institution, and property taxes paid during the year. Both of these can be claimed as itemized deductions on Schedule A, which must be attached to the regular 1040 income tax form.

Some lesser-known mortgage items are also deductible, such as late payment charges, penalties for paying off a loan early and interest on loans taken out to buy stock in a cooperative housing corporation. Details are available from the Internal Revenue Service in Publication 530.

Mortgage interest paid at the settlement of a home purchase is also tax deductible, subject to certain restrictions. There are some intricate rules for ”points,” which are also often called loan origination fees, loan discounts or maximum loan charges.

The IRS says a homeowner can’t fully deduct points in the year paid unless a nine-point test is met. For instance, the loan must be secured by a taxpayer’s main home, points must be standard business practice in the area and they can’t be in place of non-deductible fees such as attorney fees or title fees.

Some of these same requirements apply to points paid on a home improvement loan, which also can be fully deductible. The points paid by a home seller aren’t deductible by the seller, but they are deductible by the buyer, again subject to the IRS requirements.

Not deductible in a home sale transaction are such things as notary fees, legal fees, title insurance and transfer taxes. But some of these things can be added to the home’s future value, or ”basis,” and be recouped when the house is sold.

Also not deductible for homeowners: fire or homeowner’s insurance premiums, cost of utilities and any money applied to the principal of the mortgage loan.