Published on January 3rd, 2014 | by Genevieve Williams0
Your Home and 2013 Taxes
This could be the last year Uncle Sam will be offering 3 significant tax deductions related to owning a home. Those deductions are Private Mortgage Insurance, Energy-Efficient Upgrades, and Debt Forgiveness.
- PMI (Private Mortgage Insurance) is the insurance you pay your lender if you’ve purchased a home and put less than 20% down. It protects the lender in case of mortgage default. This may be the last year you can deduct the amount you pay in PMI from your 2013 taxes.
- Energy-Efficient Upgrades credit allows you to offset what you owe the IRS for up to 10% of the amount you spent on some energy-efficient upgrades – from water heaters to stoves to insulation.
- Debt Forgiveness means the IRS is forgiving you (in tax terms) for the amount of the mortgage on which you defaulted. So, if you were unable to pay your mortgage and the bank agreed to let you short-sale the home for $30,000 less than what is owed, you would not have to pay taxes on that $30,000 under Debt Forgiveness. 2013 is possibly the last year for this.
On a positive note, 2013 is the first year offering a simplified option for the Home Office Deduction. The deduction lets you claim $5 per square foot for up to 300 square feet, instead of having to calculate all expenses of the home office using a long form. But remember, your home office must be used for business purposes exclusively and on a regular basis.
There is a slight chance we will see these benefits again next year, but it is likely we won’t. So, soak them up while you can!