Quick Overview of Deductible Home Expenses + Record-keeping
Hey there friends,
Within a week, I've been asked by a few millennials about what costs they could and couldn't deduct from buying and owning a home, so I hopped over to the IRS site and quoted the down-low here, and you can get all the legit details at: https://www.irs.gov/publications/p530/ar02.html#en_US_2015_publink100011955
Below are excerpts from the IRS publication that highlight at a high level which costs are deductible are which are not for your awareness before and after purchasing a home:
What You Can Deduct
The only costs you can deduct are:
- real estate taxes actually paid to the taxing authority,
- interest that qualifies as home mortgage interest, and
- mortgage insurance premiums.
Deductible Real Estate Taxes. You can deduct real estate taxes imposed on you. You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year. If you own a cooperative apartment, see Special Rules for Cooperatives
What You Cannot Deduct:
Some nondeductible expenses that may be included in your house payment include:
- Fire or homeowner's insurance premiums, and
- The amount applied to reduce the principal of the mortgage.
Nondeductible payments. You cannot deduct any of the following items.
- Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance.
- Wages you pay for domestic help.
- The cost of utilities, such as gas, electricity, or water.
- Most settlement costs. See Settlement or closing costs under Cost as Basis, later, for more information.
- Forfeited deposits, down payments, or earnest money.
As long as you own the property and, after you dispose of it, the IRS suggests that you keep all receipts and records of the followings for your Home Improvements. Again, this is only for your awareness, consult your accountant, and refer to the IRS publication and guidelines at: https://www.irs.gov/publications/p530/ar02.html#en_US_2015_publink100011955
Record of Home Improvements
Hope this short article helps with the preliminary information on which home expenses are deductible. Again, consult your accountant, and refer to the IRS publication and guidelines at: https://www.irs.gov/publications/p530/ar02.html#en_US_2015_publink100011955