Improve Your Return: Look For Tax Breaks Hidden In Your Home

The roof over your head can offer more than shelter: Think tax break.

And you don’t have to be Home Improvement's Tim “The Tool Man” Taylor (DIS) to take advantage of these benefits. There are many ways to up your return, and it’s not just through home improvements (although they can help).

If you’re a homeowner you may be aware of the many tax benefits your home has to offer. But recently a few new wrinkles were added to the tax code. Here is MainStreet's take on homeowner tax saving tips. 

Mortgage Interest

This is one of the most popular tax deductions around. A homeowner can deduct all interest paid on a mortgage as long as the loan doesn't exceed $1 million. The best part is, if you own a second home, the interest may also be deductible. Keep in mind: The combined loan amounts must fall under the $1 million ceiling.

Interest on a second mortgage on your principal residence, a home equity loan or a home equity line of credit also might be deductible. In most cases, equity debts of $100,000 or less are fully deductible.

Points

A loan point is 1% of your loan amount. Points are usually paid in order to obtain a more favorable loan rate. In most cases, any points you pay on the purchase of your principal residence are considered mortgage interest and are fully deducible in the year paid. Even points paid by the seller are deductible by buyer.

Points paid for other home-related debt, such as an equity loan, also may be deductible, but over the life of the loan. An exception is if part of the refinanced mortgage proceeds are used to improve your main home; then you can fully deduct the part of the points related to the improvement in the year you paid them.