Know what’s deductible after buying that first home, sweet home
Channel: Accounting Instruction, Help, & How To
Date: 08/09/2022

Know what’s deductible after buying that first home, sweet home
IRS Tax Tip
https://www.irs.gov/newsroom/know-whats-deductible-after-buying-that-first-home-sweet-home
https://accountinginstruction.info/
Making the dream of owning a home a reality is a big step for many people. Whether a fixer-upper or dream home, homeownership is a milestone that can come with a learning curve. First-time homeowners should make themselves familiar with authorized deductions, programs that can assist with home ownership and the use of housing allowances that can be beneficial.

When it comes to home ownership, the IRS considers a home to be a house, condominium, cooperative apartment, mobile home, houseboat or house trailer that contains a sleeping space, toilet and cooking facilities.

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 only costs the homeowner can deduct are:

state and local real estate taxes, subject to the $10,000 limit
home mortgage interest, within the allowed limits
mortgage insurance premiums
Taxpayers must file Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Income Tax Return for Seniors, and itemize their deductions to deduct home ownership expenses. However, taxpayers can't take the standard deduction if they itemize.

Non-deductible payments and expenses
Homeowners can't deduct any of the following items.

Insurance, other than mortgage insurance, including fire and comprehensive coverage, and title insurance
The amount applied to reduce the principal of the mortgage
Wages you pay for 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 is meant to help individuals with lower income 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. The MCC will show the certificate credit rate the homeowner will use to figure their credit. It will also show the certified indebtedness amount and only the interest on that amount qualifies for the credit.

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 January 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