Deductions for Home Owners

The IRS provides detailed information on what can and cannot be deducted by homeowners. Generally, you can deduct property taxes, mortgage interest and mortgage insurance premiums paid during the year.

Some nondeductible expenses that may be included in your monthly payment include fire or homeowner's insurance premiums and the amount applied to reduce the principal of the mortgage.

There are special provisions for minister's or military housing allowance. If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you still can deduct your real estate taxes and your home mortgage interest. You do not have to reduce your deductions by your nontaxable allowance.

Nondeductible payments. The IRS does not allow you to deduct the following items.
* Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance.

* Wages you pay for domestic help.

* Depreciation.

* The cost of utilities, such as gas, electricity, or water.

* Forfeited deposits, down payments, or earnest money.

The IRS provides comprehensive information on what you can and cannot deduct, what forms to file and how to calculate. As always, you are advised to consult with a tax professional to ensure that you fully maximize the deductions you are eligible for.