3 Tax Breaks Homeowners Won't Want to Miss

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Congratulations -- you bought a home! You may not be looking forward to having to pay property taxes and home insurance, among other things, but being a homeowner offers plenty of financial upside, too, such as through some tax benefits. Here are several key deductions -- and tax credits -- that may save you a bundle come tax time.

Selena Maranjian : The homeowner-related tax deduction that's perhaps most familiar to all is the deduction of home mortgage interest. If you have taken out a loan to buy a house, condo, mobile home, or even a boat or recreational vehicle, you may be able to deduct the interest you pay. It can even work for home equity loans or lines of credit -- as long as the debt is secured by your primary or secondary home (and not a third or other home).

There are rules related to this, of course. For starters, you can only access the deduction if you forego taking the standard deduction (which is $6,300 for single filers in 2015 and $12,600 for married couples filing jointly) and instead itemize your deductions. (That can actually make it not worth your while if you don't have sufficient deductions to outweigh the standard one.) The mortgaged property must be one in which you have an ownership interest. You can't help a child with their mortgage payments and then deduct the interest you pay. You'll need to have records documenting the mortgage interest you paid during the tax year -- you'll likely get such documentation from your lender.

Know that the days of deductibility for home mortgage interest may be numbered, though. Some in Washington want to get rid of it in order to boost tax revenue. Others simply decry it as unfair, giving a clear benefit to mortgage-holding Americans and not to renters -- and benefiting high-earners and buyers of pricey property more than low-income Americans and those buying modest homes. Indeed, law professor A. Mechele Dickerson at the University of Texas has noted, "The mortgage interest deduction is not used by most taxpayers. Nearly two-thirds of all U.S. households take the standard deduction instead of itemizing their deductions and only a quarter of all taxpayers deduct mortgage interest."

Still, you may be among those who can profit from the deduction. If you think you are, read up on its other rules. As an example, being in the 25% tax bracket and able to deduct $10,000 of interest can save you a sizable $2,500!

Certain tax breaks apply just to homeowners. Photo: USDA , Flickr

Dan Caplinger : One key tax deduction that homeowners are allowed to take covers the property taxes they have to pay. Property tax paid to state and local governments qualify for the deduction, but in order to claim it, you have to itemize your deductions on your tax return. As Selena points out with the mortgage interest deduction, if your total deductible expenses don't exceed the standard deduction, then what you spend on your home expenses won't give you the tax breaks that you might have counted on when you purchased your home.

Another thing to keep in mind is that unlike mortgage interest, property tax payments are not deductible if you're subject to the alternative minimum tax. With the AMT calculation, you actually have to add back any deduction you took on your regular tax return for property taxes. That leaves you two different ways you can end up losing the property tax deduction.

For most taxpayers, though, being able to deduct property taxes is a key advantage. Although you can't see the impact that property tax has when you pay rent, you can count on the fact that your landlord accounts for it and that you pay your fair share without a deduction. In some cases, the property tax deduction can make a key difference in the decision of whether to buy or rent.

Jason Hall : Another group of tax benefits which homeowners should be aware of are tax credits. These are different from tax deductions. Deductions, such as the ones Dan and Selena discuss above, allow you to reduce your taxable income by the amount of those items. For example, if you paid $5,000 in mortgage interest in 2015, you'd be able to deduct that $5,000 from your taxable income.

Tax credits, on the other hand, are just that -- a dollar-for-dollar credit for actual federal taxes, and they are usually tied to things you would buy for your home.

The non-business energy property credit can be worth 10% of the cost of certain energy-efficiency improvements to your home, including outside windows and doors, insulation, and high-efficiency heating and air-conditioning systems. The maximum credit you can get is $500 -- of which only $200 can be from windows -- and the credit is set to expire at the end of 2016. So if you're planning to replace or improve on these things, make sure to buy products that qualify and claim your credit.

If you're looking to invest in renewable energy, there are some major tax credits you can benefit from. The Residential Energy Efficient Property Credit gives a 30% credit from the purchase of a renewable energy system, such as solar or wind energy systems. Considering that a residential solar system can easily cost tens of thousands of dollars, this is a significant credit that can make the difference between a system making long-term financial sense, or not.

Depending on what state you live in, there could be additional state credits above and beyond the federal credits.

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The article 3 Tax Breaks Homeowners Won't Want to Miss originally appeared on Fool.com.

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