3 Homeowner Tax Breaks That Ended in 2016

Make Sure You Take These Homeowner Tax Breaks for 2016 If You Can… They May Not Come Back

Perhaps you didn’t realize it, but many tax breaks have a life span of only one year. Technically, a lot of those tax credits and deductions expired on Dec. 31, 2016—which means that if you’re a homeowner, you might want to lock in whatever home-related tax benefits you can when you file last year’s return.Granted, it’s certainly possible these tax benefits could be renewed for 2017, as they have been in past years. But with a new president in office and plenty of changes afoot, who knows?If you weren’t aware of these financial bonuses, you could save a bundle by reading on. Here are some homeowner tax breaks to take now—before it’s too late!

Private mortgage insurance

“One significant change to the tax code is that the mortgage insurance deduction expired,” says Wendy Connick of Connick Financial Solutions.

Mortgage insurance is what you pay your lender each month if you put down less than 20% on a home to protect the lender in case you default. And given that mortgage insurance typically costs 0.3% to 1.15% of your home loan, this can save you a pretty penny—the premium you paid in 2016 can be deducted from your taxable income.

Keep in mind, however, that this deduction doesn’t apply to any loan issued before Jan. 1, 2007, says Brian Ashcraft, director of compliance at Liberty Tax Service. The deduction also comes with limits. If your adjusted gross income is higher than $100,000 ($50,000 for married individuals filing separately), the deduction is reduced, and if your adjusted gross income exceeds $109,000 ($54,500, if married filing separately), you don’t qualify for the deduction.

‘Green’ home improvements

The Residential Energy Efficient Property credit lets you offset what you owe the IRS, dollar for dollar, up to 10% of the amount you spent on your qualified energy-efficiency upgrades.

So don’t miss out on this sweet little tax credit for any “green” updates you made to your home last year, says Michael Banks, founder of FortunateInvestor.com.

This includes everything from a new HVAC system to energy-efficient windows and storm doors. Since these credits expired at the end of 2016, “if you don’t include them now, you won’t be able to claim them next year.”

On the downside, there’s a lifetime limit of $500 for this credit. But on the bright side, the right improvement could lower your utility bills indefinitely.

Forgiven mortgage debt

When you go through a short sale, foreclosure, or loan modification, your lender typically lets you off the hook for some or all of what you still owe on your mortgage.

The catch? That forgiven mortgage debt is usually seen as income—and that means you have to pay income tax on it. For example, if your lender agreed to let you short-sell your home for, say, $50,000 less than you owed on the mortgage and forgave you for the balance, you’d owe income tax on that $50,000.

However, under the Mortgage Forgiveness Debt Relief Act, which expired at the end of 2016, homeowners experiencing financial distress caught a break. No taxes were levied on discharges of indebtedness for up to $2 million for married taxpayers filing jointly and up to $1 million for a single or married taxpayer filing a separate return.

Source: California Association of Realtors

Please note: For any tax advice, you should rely on the advice of a professional accountant.

About the Author

Shannon Jones has been selling real estate since 1998 and specializes in listing and marketing homes. She has consistently been one of the top Realtors in the Long Beach area. Prior to her award-winning career in real estate with the Shannon jones Team, Shannon has had successful careers in journalism and public relations. She holds a bachelors degree from UC Irvine and a masters degree from UC Berkeley. Shannon holds E-Pro, CDPE (Certified Distressed Property Expert), and PSC (Pre-Foreclosure Specialist) certifications. Shannon is very personable and maintains a very strong moral compass, always putting the best interest of home buyers/sellers above monetary goals. A California native, Shannon enjoys gardening, travel, reading, cooking and poker when she’s not selling homes MY DESIGNATIONS Lic# 01247705 | CDPE (Certified Distressed Property Expert) | E-Pro | PSC (Pre-Foreclosure Specialist) MY SERVICE AREAS Anaheim Bellflower Buena Park Carson Cerritos Cypress Downey Fountain Valley Garden Grove Huntington Beach La Palma Lakewood Long Beach Los Alamitos Los Angeles County Norwalk Orange County Rossmoor San Pedro Seal Beach Signal Hill South Bay Westminster

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