Home Tax Credit for Homeowners
Home ownership is part of the American Dream and with home tax credits, homeowners have it made easier for them to achieve it.
Tax credits and deductions is a famous way that the government encourages or discourages certain behavior.
Here are a number of ways home ownership is encouraged:
The following can be deducted to reduce your taxable income and lowering your taxes.
Mortgage Interest Credit
- Home Mortgage Interest - Interest for the mortgage used to obtain your main or second home. The amount you paid that goes toward the principal - the actual cost of your home - cannot be deducted. To see how much is interest and how much is principal see Form 1098 that you get from your bank.
- Points - like mortgage interest can be deducted. Depending on circumstances, it can be deducted either all at once or divided over the life of the mortgage.
- Real Estate Taxes - Real estate tax also known as property tax is a deductible tax. Although you can now only deduct it if you itemize deductions, in 2008 and 2009 you were able to add a limited amount of your real estate tax to your standard deduction.
- Mortgage Insurance Premiums - This is a new (and temporary) deduction for mortgage insurance premiums on mortgages acquired after January 1 2007. It is scheduled to expire December 31, 2011 so you can still file it with your 2011 tax return.
This credit helps low income people buy homes. To be eligible for this credit you need to get a Mortgage Credit Certificate (MCC) from your state or local government before obtaining your mortgage.
The mortgage interest credit is different than the mortgage interest itemized deduction because it lowers the actual tax not only the taxable income. However you are limited to a certain percentage of the mortgage interest (this depends on your state) or a $2000- credit.
First-Time Homebuyer Credit
An $8000- credit for first time home buyers who purchased a new home between December 31 2008 and September 30 2010. Previously it had been a $7,500- loan that had to be repaid in 15 years and it was change to an actual home tax credit.
If you are a member of the armed forces or an employee of the intelligence community you might still be able to claim the credit this year if you purchased before July 1, 2011.
Read more about the
first time home buyer credit.
Home office deduction
Home energy credit
Updated January 11, 2012
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