Slogging through your financial records and hoping to find a few tax deductions to ease the pain? Don’t despair, here are a few potential pain relievers.
If you are anticipating a rough year when it comes to filing taxes, don’t turn those forms into new year’s confetti just yet. Several key provisions for homeowners have been retroactively renewed for 2014—and they might provide you with some much-needed tax relief.
If you did any of these three things in 2014, you still have reason to celebrate (OK, maybe not really celebrate, but celebrate as much as anyone can while doing taxes).
In the third quarter of 2014, 8.1 million homes in the United States were seriously underwater, according to the real estate research firm RealtyTrac. If you were a homeowner who decided to short-sell your home last year, it’s not all bad news: Congress once again extended the Mortgage Forgiveness Debt Relief Act.
The act made it so qualifying homeowners did not have to pay tax on debt forgiven by a lender. Without the act’s tax shield, that forgiven debt—up to $2 million—is seen as taxable income by the government. For homeowners owing hundreds of thousands of dollars on a loan, that could be a crippling amount of money owed to the IRS.
The act is retroactive, so when Congress finally renewed it in late December, it covered short sales in 2014. Short-selling a home in 2015 is a gamble—if Congress doesn’t renew the act, you’ll have to pay taxes on forgiven debt.
Private mortgage insurance
For people who couldn’t provide a 20% down payment, private mortgage insurance (PMI) is a familiar expense. But if you bought your house in 2007 or afterward, you were given a break if you earned less than a certain amount of money each year. Luckily, that provision is still around. The bill was set to expire in 2014, but two weeks before the end of the year, Congress extended the provision into 2015.
So if you bought a home (including vacation homes, but not rental properties) in 2014, or any other year since 2007, you can still deduct PMI from your taxes.
However, the PMI deduction begins phasing out when the adjusted gross income (AGI) of the head of household, married filing jointly, or single earner passes $100,000. For married filing separately, the phaseout begins at $50,000 AGI.
The deduction is phased out by 10% for every $1,000 earned over the threshold. If you pass $109,000 AGI (or $54,500 for married homeowners filing separately), the deduction phases out completely.
If you waited until 2014 to make energy-efficient upgrades, you may be in luck. You can claim up to $500, cumulatively, in tax credits for energy-efficient upgrades involving the following:
- Exterior windows
- Heating and cooling systems
- Exterior doors
- Biomass stoves
This tax break is cumulative for previous years. If you claimed $400 worth of equipment in 2013, you still have only $100 to work with.
The extension of these tax provisions will help some home buyers for 2014, but there’s no guarantee that Congress will renew them for the 2015 tax year.