Besides swimming, sunning, boating, and more, the summer months are a popular time to buy or sell a house. New homeowners should put reviewing the tax deductions, programs, and housing allowances they may be eligible for on their move-in to-do list.

Deductible House-related Expenses

Most home buyers take out a mortgage loan to buy their home and then make monthly payments to the mortgage holder. This payment may include several costs of owning a home. The costs the homeowner can deduct according to a news release are:

Taxpayers must itemize their deductions to deduct homeownership expenses.

Non-deductible Payments and Expenses

Homeowners can’t deduct any of the following items:

  • Insurance including fire and comprehensive coverage and title insurance
  • The amount applied to reduce the principal of the mortgage
  • Wages paid to domestic help
  • Depreciation
  • The cost of 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 helps people with lower incomes afford home ownership. Those who qualify can claim the credit each year for part of the home mortgage interest paid. A homeowner may be eligible for the credit if they were issued a qualified Mortgage Credit Certificate from their state or local government. An MCC is issued only for a new mortgage for the purchase of a main home.

Homeowners Assistance Fund

The Homeowners Assistance Fund program provides financial assistance to eligible homeowners for paying certain expenses related to their principal residence to prevent mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy, services, and also displacements of homeowners experiencing financial hardship after Jan. 21, 2020.

Minister’s or Military Housing Allowance

Ministers and members of the uniformed services who receive a nontaxable housing allowance can still deduct their real estate taxes and home mortgage interest. They don’t have to reduce their deductions based on the allowance.

More Information:

Publication 530, Tax Information for Homeowners

Publication 936, Home Mortgage Interest Deduction

Source: IRS