Deductible Home OwnershipThere are many reasons to look toward home ownership when looking to deduct many items come tax time. Home ownership can be lucrative as long as you follow a few guidelines and don't let your house become just that, a house; make it a profit centre as well as an investment that can lead to more investments.
One of the largest deductions you will ever get out of your home is the interest. As with most every other person in the western hemisphere, the mortgage that you have on your home is more than likely loaned out as "fully amortized". This, in a nutshell, means that the money you outlay every month is divided between you actual monthly payment, or principal, and the interest charged on the loan. This is definitely not an even split, as you will find that most of your monthly payment really pays off the interest portion.
Based upon an amortization period you will have your mortgage either paid off in 20, 25 or 30 years. If you use the deduction section of Schedule A, you will find that the interest portion of your mortgage payments is tax deductible. Therefore, it is extremely important to keep records from your financial institution, which are usually sent out to home owners each year prior to tax time. The only caveat to this tax deduction is that the loan that you have out on the home is either your primary home or second home forms the collateral portion of the mortgage loan.
What classifies a home, as a home? A home is basically the definition of where you live, being where you sleep, eat or use bathroom facilities. A home can be take on any form of residence such as a house, co-op, condominium, mobile home, trailer or even a houseboat; provided, the home falls under the definition of a residence outlined above. You can even use a rental property as a second home as long as you "live in it either fourteen days out of the year, or, at least 10% of the number of the days that you rent it for, whichever is greater". This means that a property such as a vacation home that you own, but, rent out to other vacationers must be lived in by you for at least fourteen days of the year. This, in essence, is similar to a timesharing situation.
Other deductible items that you come with home ownership include property taxes and discount points.