Buying a Home > Taxes 3 Tax Deductions on Your Monthly Home Payments

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“Will Uncle Sam help pay my mortgage?”

Nope, but since he’s a good neighbor, he’ll do you a favor and cut you some slack when it comes to homeowner taxes. Particularly three big payments you’re burdened with every month:

Mortgage Interest:

Uncle Sam's housewarming gift to you - he'll allow you to deduct your interest payments on your taxes. Same goes for the high interest on traditional home improvement loans. Ka-ching! The catch: the home must be your main or second home. If it’s your third home, you’re out of luck. (And if it’s your third, um, can we crash this weekend?)

Property Taxes:

You can also deduct your property or real estate taxes that you pay to your state or local government. The IRS specifies that property tax deductions must solely apply to community or governmental purposes; you can’t deduct home services (a separate fee you might pay for trash disposal, for instance) or homeowner’s association fees. We can’t win ‘em all. 

Private Mortgage Insurance:

While your run-of-the-mill homeowner’s insurance isn’t deductible, if you had to get private mortgage insurance (PMI) because your down payment was less than 20%, you can deduct PMI on your taxes. But don’t get too excited yet - there are income limits for this deduction, and if your household income is greater than $109,000, you can’t claim the PMI deduction. Word is still out on whether this tax break, created in 2007, will extend into the taxes you’ll be filing in April 2016, so stay tuned. Maybe harass your local Congress member too.   

 

Photo: 401(k) 2012

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