April 15th seems a long way off, but it will be here before you know it.
Now is the perfect time to start getting your paperwork in order.
Owning real estate can make a big difference on your tax return, so make sure that you’re taking advantage of all the deductions you’re entitled to.
We’ve outlined a few below:
Unless you paid cash for your purchase, you probably took out a loan to buy your Chicago home.
Mortgage interest is one of the best tax deductions available, so be sure to hang on to that 1098 Mortgage Interest Statement from your lender.
You can almost always deduct the entire amount of interest paid per calendar year.
Real Estate Taxes
Depending on where your property is located, you are likely paying real estate tax, either to the state or to a local governing authority.
Taxes based on property value are generally deductible as well. You may have an escrow account to hold these funds during the year, so be sure that you only deduct the amount of taxes you actually paid.
Home Equity Line of Credit
You may deduct home equity line of credit (HELOC) debt interest as long as you are legally liable to pay the interest, the interest is paid in the tax year, and the debt is secured by your home.
The home equity debt has a limit of up to $100,000 ($50,000 if married filing separately).
Mortgage Insurance Premiums
Depending on how your loan is structured, you may have mortgage insurance. With the recently passed American Tax Relief Act of 2012, all mortgage insurance premiums are tax deductible for the 2012 and 2013 tax year. There are some qualifications, so check with your tax advisor.
Mortgage Interest on Land
If you purchased land with the intent to build, the interest you have paid may qualify as deductible mortgage interest as long as the structure becomes your qualified residence within a 24-month period.
This deductibility of bare land mortgage interest is a tricky one. You can see the IRS explanation here.
Your home could be one of your greatest resources for reducing your tax liability. Most times these deductions are itemized on a Schedule A (Form 1040) when you prepare your taxes.
A great next step is to call a qualified tax planning professional. Please feel free to contact us if you would like a referral.