Common Home Tax Deductions

6 Common Home Tax Deductions

They say with great rewards come great risks; the same holds true for owning a home.  With tax season in full swing, homeowners are busy itemizing real-estate-related deductions, but can easily deduct the wrong items, or amounts.  It can be confusing to navigate on your own, so we have found a list with great tips to help prevent future headaches when it comes to common home tax deductions.  See the first tip below, and click here to read the full article.

Trap No. 1: Deducting energy-efficient appliances that don’t qualify

Tax credits are available for installing certain energy-efficient systems in your home: up to $500 for items like biomass stoves, central AC units, roofs, and insulation, and a credit for 30% of the cost of installing energy-generating systems like solar panels, geothermal heat pumps, and wind turbines. But the regulations for what systems qualify are strict and can change year to year, warns Patrick O’Connor of O’Connor & Associates.  Some taxpayers think if they buy a stove with an Energy Star label, they can deduct the cost of the stove, but it doesn’t quite work that way.

“If you’re not sure whether you qualify for a credit, talk to the vendor,” says O’Connor. “The rules are complicated.”

Another trap people fall into is not realizing that some of these credits have a lifetime—not annual—cap of $500, and can’t be used for new construction or second homes. The IRS regulations and deduction instructions can be found on Form 5695.