Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: What are some common, last-minute U.S. tax deductions related to my home that I might be missing?
"Most people overlook the energy-efficiency updates," noted Kevin Packman, partner at Holland & Knight law firm in Miami.
If you replaced heating or air conditioning systems, windows, doors or skylights or installed additional insulation or energy-efficient roofs last year on your primary home, you may qualify for a credit of as much as $500, said Maxine Aaronson, a tax attorney in private practice in Dallas. This credit, sometimes known as the Energy Star credit, applies only to an existing principal residence, she said. However, 2016 is the last tax year for which this credit is available.
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But you have until 2021 to take advantage of a tax credit for the installation of geothermal heat pumps, solar energy systems and small wind turbines on your principal residence. Through the
Residential Energy Efficient Property Credit, you can claim a 30% tax credit on the cost, with no maximum cap, Ms. Aaronson said. Both new construction and existing homes are eligible.
If you itemize your deductions, you can also deduct the interest on your mortgage and home equity loan, subject to certain limits, as well as real estate taxes.
The mortgage interest deduction is capped at $1 million, combined for both primary and secondary residences, Ms. Aaronson said.
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You may be surprised "just how broad the definition of a home is," she said. For example, a boat or a recreational vehicle may qualify as a home if it has permanent sleeping, cooking and toilet facilities, she said. But for the interest to be deductible, you have to have given the lender a security interest in the property.
A separate $100,000 limit applies to home equity debt, provided the loan is secured by a qualifying home and the combined mortgage debt is less than the fair market value of the home, Ms. Aaronson added.
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Although you can’t deduct more than $100,000 as home equity interest, you may be able to deduct the excess elsewhere on your return. "For example, if some of the home-equity-loan proceeds had been used to invest in the stock market, that share of the [home-equity-loan] interest would be deductible under the investment interest rules," she said.
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