The following list (not comprehensive or all-inclusive) of taxes is provided to first-time homeowners, o
r even homeowners in general, that wish to get the most tax deductions from the cost of owning a home.
- Real Estate Taxes – A homeowner can deduct a real estate tax if the tax is an annual tax based on the assessed value of the real property and the taxing authority charges a uniform rate on all property in its jurisdiction. In order to be deductible, the tax must also be for the welfare of the general public and not be a payment for a special privilege or service.
- Homeowners’ Association Assessments – A homeowner cannot deduct these assessments because the fees are not assessed by a state or local government.
- Transfer Taxes – A homeowner cannot deduct the transfer taxes and similar taxes and charges on the sale of a personal home. However, the homeowner can include these taxes and costs in the basis of the property.
- Sales Taxes – A homeowner can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A of Form 1040. Deductible sales taxes may include sales taxes paid on a home or building materials.
- Mortgage Interest – A homeowner can deduct their mortgage interest if the loan is secured by the homeowner’s main home. It does not matter if the loan is a first, second, or a home equity loan.
- Points – A homeowner cannot deduct the full amount of the points or charges paid by a borrower in order to obtain a home mrotgage, with a small exception. Instead, the homeowner must deduct the points over the life of the mortgage.
- Mortgage Insurance Premiums – A homeowner can take an itemized deduction on Schedule A of Form 1040 for premiums paid or accrued for qualified mortgage insurance in connection with home acquisition debt on the homeowner’s qualified home.