The following area five potential deductions that you may be able to claim if you had a real estate transaction in 2016. As with any tax related matter, we suggest you consult with a tax accountant to determine your specific eligibility.
If you paid state taxes on a primary residence, those taxes are deductible and may be significant depending on where that home was located. In a state like New Jersey, for example, property taxes are close to 2.4%, making this deduction a sizable deduction.
If you financed your home through a mortgage that included paying for "points" in order to take advantage of a better mortgage interest rate, that expense is deductible in the tax year that you paid for the points. Typically, one point is equivalent to one percent of your long amount, which means on a $400,000 mortgage with one point, you would have a $4,000 deduction for that one point. The same is true for points purchased on a home equity loan or refinance loan. However, that cost in the form of a deduction must be spread over the life of the loan versus taken in the year the loan was originated.
Check into tax credits associated with energy efficiency purchases/improvements that you made on your home. These credits can apply to things such as new windows with better insulation, energy efficient furnaces or air conditioners, adding or replacing insulation, etc. Tax credits can be a powerful offset as tehy are dollar-for-dollar savings. For more information visit: https://www.energystar.gov/about/federal_tax_credits
One of the largest deductions tied to a real estate transaction is interest from a home mortgage. Especially in the early years, interest payments are high on home mortgages and provide a hefty deduction on your taxes. Interest paid on secondary property loans may also be eligible if that property is not used for rental purposes.
If your property realized damage and insurance did not pay for the repairs (directly or by reimbursement), the losses may also provide a deduction for you. The loss deduction must equate to more than 10% of your adjusted gross income to be eligible. Be sure to keep accurate documentation of the actual costs.
Every little bit can make a difference. So, don't leave money on the table and take advantage of every opportunity to save on your taxes.
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The source of this real property information is the copyrighted and proprietary database compilation of the © 2020 M.L.S. of Naples, Inc. and © 2020 Renee Hahn, Realtor, William Raveis Real Estate. Accuracy of this information is not warranted or guaranteed. Information should be independently verified if any person intends to engage in a transaction in reliance upon it.
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