What It Is: This deduction lets homeowners reduce their taxable income by the interest paid on their mortgage.

Eligibility Criteria: Applicable for interest on a mortgage up to $750,000 ($375,000 if married filing separately). It must be for your primary or secondary residence.

Exceptions: Interest on loans used for purposes outside of buying, building, or improving your home is not deductible.

How to Claim: Itemize deductions on your tax return and use Form 1098, provided by your lender, to report the amount of interest paid.

What It Is: Homeowners can deduct the property taxes they pay each year.

Eligibility Criteria: Applies to property taxes paid on your primary or secondary residence.

Exceptions: There’s a combined total deduction limit of $10,000 ($5,000 if married filing separately) for property and other state and local taxes.

How to Claim: Itemize deductions on your tax return, and keep your property tax bills as proof of payment.

Mortgage Points: Points paid to secure a mortgage loan can be deductible.

Prepaid Interest: Often paid at closing, this can be deductible in the year it’s paid.

Mortgage Insurance Premiums: Premiums for private mortgage insurance (PMI), FHA, USDA, and VA funding fees may be deductible, depending on the loan type and your income level.

Late Payment Charges and Prepayment Penalties: These are generally deductible as mortgage interest if the charge was not for a specific service in connection with your mortgage loan.

What It Is: Deduction for using part of your home exclusively for business.

Eligibility Criteria: Must be a designated workspace used regularly and exclusively for business.

Exceptions: The space cannot be used for personal purposes.

How to Claim: Calculate the percentage of your home used for business and apply that percentage to eligible home expenses.

What It Is: Tax credits for certain energy-efficient home improvements.

Eligibility Criteria: Includes specific improvements like solar panels, wind turbines, and others.

Exceptions: Must meet certain energy standards.

How to Claim: Keep receipts and certifications and claim the credit on your tax return.

Understanding and utilizing these tax deductions can lead to significant savings and make homeownership more financially appealing. While the tax code can be complex, being informed of these benefits is a crucial part of smart homeownership. For personalized advice based on your specific situation, consulting a tax professional is always recommended.

Reach out to our team at Vellum Mortgage. We’re here to guide you through every step of the homebuying process, ensuring you make the most of your investment. Contact us today to learn more!

Disclaimer: Tax laws are complex and can vary based on individual circumstances. Homeowners are encouraged to consult with a tax advisor to determine specific qualifications for tax deductions.