Owning a home can be a significant financial commitment, whether you're a current homeowner or planning to buy a home. Fortunately, there are tax benefits available through the IRS that can help you save money and offset some of the costs associated with homeownership. Let’s break down various tax deductions, programs, and housing allowances that homeowners should review to see if they are eligible.

Deductible House-Related Expenses

Most home buyers take out a mortgage to purchase their home and then make monthly payments to the mortgage holder. These payments often include several bundled costs of owning a home. Here are some of the deductible house-related expenses:

• State and Local Real Estate Taxes:  Homeowners can deduct state and local real estate taxes, but it's important to note that there is a $10,000 limit on this deduction. This limit applies to the total of state and local taxes, including income or sales taxes.
• Home Mortgage Interest:  Another significant deduction is home mortgage interest. Homeowners can deduct the interest paid on their mortgage within the allowed limits. To take advantage of this deduction, taxpayers must itemize their deductions on their tax returns.

Non-Deductible Expenses

It's also important to understand which expenses are not deductible. Homeowners cannot deduct the following items:

• Insurance, including fire and comprehensive coverage and title insurance.
• Amounts applied to reduce the principal of the mortgage.
• Wages paid to domestic help.
• Depreciation.
• Utilities such as gas, electricity, or water.
• Most settlement or closing costs.
• Forfeited deposits, down payments, or earnest money.
• Internet or Wi-Fi system or service.
• Homeowners’ association fees, condominium association fees, or common charges.
• Home repairs.

Mortgage Interest Credit

The Mortgage Interest Credit is designed to help people with lower incomes afford homeownership. Homeowners who qualify can claim the credit on their tax return each year for a portion of the home mortgage interest paid. To be eligible for this credit, homeowners must have been issued a qualified Mortgage Credit Certificate from their state or local government. This certificate is typically issued only for new mortgages used to purchase a main home. When you get qualified by a lender for a home loan, ask your loan officer if you qualify for a Mortgage Credit Certificate from your local or state govenment.

Ministers and Military Housing Allowance

Ministers and members of the uniformed services who receive a nontaxable housing allowance can still benefit from certain deductions. They can deduct their real estate taxes and home mortgage interest without having to reduce their deductions based on the allowance received. This provision helps ensure that these individuals can still take full advantage of the tax benefits associated with homeownership.

Conclusion

Navigating the tax benefits available to homeowners can be complex, but understanding these deductions and credits can significantly reduce the financial burden of owning a home. By reviewing the deductible house-related expenses, taking advantage of the Mortgage Interest Credit if eligible, and understanding the special provisions for ministers and military personnel, many homeowners can maximize their tax savings.

Always consider consulting with a tax professional and checking out official IRS resources to ensure you are fully leveraging all the available benefits.