A lot of people take advantage of more well-known tax breaks like deducting your mortgage interest from your taxable income. However, homeowners can take advantage of other benefits come tax time no matter where they own property in North America.
In the U.S. … private mortgage insurance deduction: Private mortgage insurance, an extra cost for homeowners who put down less than 20%, can increase interest rates when paid through a lender. However, this bump in interest rate also means you can boost your mortgage interest rate tax break due to the higher percentage – and it’s been extended through 2016.
In Canada … first time homeowner’s deduction: For first-time Canadian homebuyers, there’s a tax credit of up to $750 that either you or your spouse can claim as a first-time ownership deduction on your taxes.
In the U.S. … energy credits deduction: Another U.S. tax credit that’s been extended through 2016 is the deduction for residential energy credits. Homeowners can access the Residential Energy Efficient Property Credit or the Nonbusiness Energy Property Credit by making green improvements to a residence that span solar, electric and water, as well as wind energy and geothermal heat pump installation costs.
In Canada … medical expenses deduction: To help homeowners with disabilities, there are Canadian tax credits of up to $7,000 for home renovations that accommodate any impairments to mobility or other home-related medical expenses.
Both … home office deduction: Both in the U.S. and in Canada, homeowners who work-at-home can claim a variety of tax breaks. In the U.S., expenses range from prorated (home expenses where some went to your office) and dedicated (expenses that are only for your office). In Canada, if your employer requires you to maintain a home office, get a federal form signifying this for your tax records – otherwise, if you are self-employed, the range of deductions becomes much larger, as long as it can be legally claimed.
All of these deductions can make the switch from renter to homeowner an attractive option. But be sure to consult a tax preparer or attorney, if you have questions on what you can and cannot claim this April.