Tax benefits for homeowners

Knowing which tax breaks are available to you may help you reduce your tax bill or increase your refund. Here are a few of the most common.

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1.     Mortgage interest

If your mortgage is under $1 million,1 generally the interest you pay is tax deductible. If you haven’t been in your home long, interest is likely a big portion of your monthly payment, so this can be a large deduction.

Not only can you deduct interest on your original mortgage, but generally speaking, you can also deduct interest payments if you refinance. Usually, you can also deduct mortgage interest on a second home.

Footnote 1. If your filing status is married filing separately, this level is $500,000.

2.     Property taxes

Generally, you’re allowed to deduct the amount you pay in property taxes.

Value: $2,132

U.S. median property tax bill

Source: Zillow, 2013

3.     Interest on home equity debt

If you took out a home loan or line of credit, to renovate for some other purpose, it may qualify as home equity debt. The interest is usually deductible on loan amounts up to $100,000 ($50,000 if your status is married filing separately).

4.     Energy-efficient home improvements

If you installed energy-efficient windows and doors, or added insulation, you may qualify for a federal tax credit. Just keep in mind this credit expires on December 31, 2016.

Value: Up to $200 for windows

Tip: Your state may have its own deductions or credits for energy efficiency. Check the Database of State Incentives for Renewables & Efficiency(http://www.dsireusa.org/).

5.     Renewable energy

If you installed solar panels, wind or fuel cells, or other equipment that uses renewable energy to help power your home, you may qualify for the Residential Energy Efficient Property Credit. To qualify, equipment must be in service by the end of December 2016, with the exception of qualified solar equipment. That credit has been extended to include property placed in service through the end of 2021.

Tip: Keep your receipts to make claiming credits easier. 

Value: Up to 30% of cost of equipment and installation

Source: IRS, 2016

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