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Beyond the Mortgage: 7 Hidden Tax Deductions Every Homeowner Should Know

An illustration of a person finding hidden tax documents and receipts throughout their home.
Don't miss out on these surprising tax benefits of owning a home.

You know you can deduct mortgage interest and property taxes, but what about the smaller, often-overlooked tax breaks that could be saving you even more money? Many homeowners only focus on the major deductions and miss out on smaller but significant savings.

This guide will reveal seven hidden tax deductions and credits, providing a checklist to ensure you aren't leaving money on the table. Let’s go beyond the basics and uncover some of the lesser-known tax benefits of owning a home.

The Hidden Deductions of Homeownership

  1. 1. Mortgage Insurance Premiums (PMI)

    If you put down less than 20% on your home, you likely have Private Mortgage Insurance (PMI). Under certain income limits, these premiums may be tax-deductible. This is a significant expense for many new homeowners, so it’s definitely worth checking if you qualify.

  2. 2. Energy-Efficient Home Improvement Credits

    Looking to make your home more eco-friendly? You can get a tax credit for qualifying energy-efficient upgrades, such as installing solar panels, new high-efficiency windows, or a new furnace. Remember, a tax credit is even more valuable than a deduction because it directly reduces your tax bill, dollar for dollar.

  3. 3. Points Paid on Your Mortgage

    When you close on a mortgage, you may pay "points" to your lender. These are essentially prepaid interest fees. In most cases, you can deduct these points over the life of the loan. This is a great way to recover some of your closing costs.

  4. 4. Home Improvement Loans for Medical Care

    If you take out a home equity loan or line of credit and use the funds to make home improvements specifically for medical care (e.g., adding a ramp or widening doorways), the interest on that loan may be tax-deductible.

  5. 5. Home Sale Expenses

    This is a great one if you've recently sold your home. Certain costs associated with the sale, such as real estate agent commissions, legal fees, and title insurance, can be used to reduce your taxable capital gain, lowering your overall tax bill.

  6. 6. State and Local Taxes (SALT)

    While we covered property taxes, it's worth revisiting the overall SALT deduction. There's a cap on how much you can deduct for state and local taxes, but you can still deduct a combined total of up to $10,000 for income, sales, and property taxes.

  7. 7. Mortgage Forgiveness

    Under certain circumstances, if a portion of your mortgage debt is forgiven, you may not have to pay taxes on that amount. This usually applies in cases of foreclosure or short sale, and it's important to consult a professional to see if you qualify.

Putting It All Together: Your Action Plan

Finding these hidden deductions requires a little extra effort, but it can be worth it. Here’s a simple action plan to get started:

  1. Review all your tax documents and receipts for the year, looking specifically for expenses related to this list.
  2. Keep detailed records, especially for any energy-efficient upgrades or home improvements you make.
  3. Consult with a tax professional if you think you might qualify for one of the more complex deductions or credits.

The key to finding all these benefits is, of course, impeccable record-keeping. You can get a head start with our guide on Organizing Your Tax Documents: A Simple System for Success.

Disclaimer & Disclosures

    I am not a professional accountant, tax preparer, or financial advisor. This content is for educational and informational purposes only and should not be considered legal, financial, or professional advice. The information is based on my personal research and experience.   

    Tax laws are complex and change frequently. Please consult with a qualified professional before making any financial decisions.   

    📢 FTC Compliance & Affiliate Disclosure: Some links in this post may be affiliate links, meaning I may earn a commission at no extra cost to you. Transparency is important, and I only recommend products/services I trust.  

Conclusion

A little extra effort can uncover valuable savings. By going beyond the obvious and looking for these hidden deductions and credits, you can significantly reduce your tax bill and keep more money in your pocket. The key is to be organized, proactive, and aware of what you may be entitled to as a homeowner.

Which of these hidden deductions was the most surprising to you? Share your insights in the comments below!

Want to make sure you're not missing any other opportunities? Check out our guide on Organizing Your Tax Documents: A Simple System for Success.

Happy tax navigating!

 

Eliza at Navigating Taxes

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