Five Tax Tips for Columbia SC Homeowners

Many Columbia SC homeowners have already filed their taxes for 2013, but a large majority have not. We direct this article to those of us who always seem to procrastinate until the last minute, and are lucky if we get our taxes filed by that dreaded April 15th deadline.

5 Important Tax Tips for Columbia SC Homeowners

Mortgage Interest

Claiming mortgage interest is the biggie, and one of the most common deductions among Columbia SC homeowners when figuring their taxes.

The deduction even covers multiple loans, so those who are Columbia SC homeowners but have a second home elsewhere can claim the interest on both, so long as the total is under the $1.1 million cap.

If you refinanced your loan and decided, "Hey, why don't we take another $50,000 out in equity," but then you don't use that money to, say, build a pool, or add a garage, that's not fully deductible. You have to use the money to improve the house, or you are not allowed a deduction for that.

Private Mortgage Insurance

Don't mistake private mortgage insurance, or PMI, for Columbia SC homeowners insurance that protects against a fire or other loss. PMI comes into play with lower-income Columbia SC homeowners who often can't afford a big down payment, and instead pay a small monthly fee as insurance against default. The idea is to protect the lender against being stuck with a big loan with zero equity in the home, as well as to allow those without huge nest eggs to buy a property with minimal down payments.

If you make a private mortgage insurance payment, in most cases this is deductible.

Cancellation of Debt

While foreclosures are not as common as they were a few years ago, debt forgiveness is still very common. If a lender agreed to forgive some (or all) of your mortgage debt, failing to report that debt forgiveness could result in a big change to your overall tax liability and result in hefty penalties from the IRS.

This also applies if you took out a home equity loan but are now having trouble making payments. Even if it's not the same as a foreclosure or a short-sale, if that second mortgage is written down by a lender then you have to report that when filing your taxes.

Casualty Losses

When disaster strikes you are able to claim a tax break for any significant losses not covered by your Columbia SC homeowners insurance policy.

The biggest "gotcha" when it comes to deducting losses is to make sure you can prove the loss and the value. Documentation is key when trying to claim casualty losses. And remember, it's out-of-pocket losses, and it has to be more than 10% of your income. So if you made $75,000, you have to pay $7,500 "out-of-pocket" before you can take any deduction.

Selling Your Home

For Columbia SC homeowners who have taken advantage of a resurgent housing market by selling their homes altogether, there are also tax implications.

If you sold your home in the past year, costs including title insurance, advertising and real estate broker fees can be claimed on your taxes.

You can also claim certain repairs to reduce your capital gains on the sale, presuming they were made within 90 days of the sale and clearly for the intent of marketing the property.

And after the sale? If you had to find a new home because of a new job that is located more than 50 miles away from your old home, you may be able to deduct your reasonable moving expenses, too.

So as you can see, Columbia SC homeowners do get some substantial tax breaks. Get more tax tips by clicking the Taxes link to your right under Columbia SC Real Estate Categories.