Being a homeowner can be beneficial when tax season rolls around. Make sure you take advantage of the various home tax deductions so you can lower your tax bill as much as possible.

Mortgage Interest Deduction

One of the coolest first time home buyer tax credits you can claim is the mortgage interest deduction. This deduction is claimed on Schedule A and as long as your mortgage is secured by your home, you should be able to claim it.

The interest that is paid on your mortgage up to $1 million ($500,000 for married filing separately) is deductible. If you decide to take on another mortgage to improve your home or purchase a new home this is also included in the $1 million limit. Additionally, if you use the loan secured by your home for something else you can deduct the interest up to $100,000 ($50,000 for married filing separately) because your home is securing the loan.

Prepaid Interest Deduction

Prepaid interest, also known as points, which you paid when you took out your mortgage, is usually 100% deductible during the year that it is paid. If you refinance your mortgage and use that money to improve your home, you can also deduct those points during the same year.

However, if you refinance to get a better rate, decrease the length of your mortgage, or use the money for something other than your home, you will have to deduct the points over the life of your mortgage. For example, if you were to refinance a 10-year mortgage and pay $3,000 in points you would have to deduct $300 annually for 10 years.

Refinancing again…

Using the same example, if you refinance three years later you will have only deducted $900, which leave $2,400. This amount would be able to be deducted in the year when you refinance again. However, if you pay points for the new points the process starts all over tax wise.

To claim these points and interest you have to report it on Schedule A. Your lender will also send you a Form 1098, which will tell you all of the points that you have paid.

PMI and FHA Mortgage Insurance Premiums

2014 was the last year where the PMI deduction could be claimed. However, if Congress renews it for 2016 you will be able to deduct it again (usually they have no problems reauthorizing it). This deduction allows you to deduct the costs of the private mortgage insurance (PMI) as mortgage interest on Schedule A. However, the loan has to have been taken out after 2007.

PMI happens when you didn’t put down a decent down payment (usually less than 20%), so the mortgage has to be insured. The premium can be deducted when you file taxes as long as your income is less than $100,000 ($50,000 for those who file married filing separately).

If your AGI is more than $100,000, the deduction is reduced by $1,000 for each 10% ($500 for those filing separately). Therefore, if you make more than $110,000 you would not be able to claim this deduction.

Some Home Repairs May Be Eligible to Be Claimed as Medical Expenses

If you are making medically required repairs, you can deduct them as a home repair tax deduction.

For example, the following home improvements would qualify as being required medically:

• Entrance or exit ramps
• Bathroom modifications
• Lowering cabinets
• Widening doors and hallways
• Adding handrails

However, when claiming home improvements as medical expenses, it’s important to make sure that you’re spending a reasonable amount of money and that you aren’t boosting the price for aesthetic or architectural reasons.