Virginia Beach, VA (PRWEB) February 27, 2012
Homeownership is often the tipping point for a taxpayer to start itemizing deductions and deducting certain qualified expenses, rather than taking the standard deduction amount, according to Liberty Tax Service. Mortgage interest can be deducted for a primary home, a second mortgage, points, a home equity loan, or line of credit secured by the home. A boat or RV can be considered a first or second home if it has facilities for sleeping and cooking, and has a toilet.
“Mortgage insurance premiums are deductible as interest for filing a 2011 return,” added John Hewitt, Founder and CEO of Liberty Tax Service.
Liberty Tax examines some other tax measures for homeowners filing a 2011 tax return:
A Residential Energy Credit Continued in 2011
For eligible property placed in service during 2011, homeowners may be able to claim a credit of up to $500 of the cost of certain energy efficient property. The residential energy credit may offer a tax break on a 2011 return if all installation was completed in 2011. Residential energy credits apply only for main homes, and can include a new roof or exterior doors that meet the Energy Star requirements. The 2011 credit must be reduced by the amount of any residential energy credit taken after 2005, and can be claimed by filing Form 5695 Residential Energy Credit.
Tax Relief for Some Financially Distressed Homeowners Was Extended in 2011
Homeowners experiencing “short sales” and foreclosures will get a break for “debt-forgiveness” tax consequences. Instead of treating cancellation of debt as taxable income on the foreclosure of a principle home, no taxes will be levied on discharges of indebtedness of up to $2 million dollars for married taxpayers filing jointly and of up to $1 million dollars for a married taxpayer filing a separate return through tax year 2012.
Remaining Points May be Deductible in the Year of Home Sale
Starting in 2011, those selling a home who haven’t deducted all of their points may be able to deduct them in the year that they sell the home. A home seller who is a single taxpayer has the opportunity to owe no tax on the first $250,000 of profit for the sale of a home owned and lived in for two of the last five years. A married couple owes no taxes on the first $500,000 of profit for the same time period.
It’s Payback Time for Some Who Claimed First-Time Home Buyer Credit
Taxpayers who purchased their homes before January 1, 2009 and took the First-Time Home Buyer Credit are required to continue repaying the credit in 2011. The credit is recaptured over 15 years. The repayment is reported directly on Form 1040, U.S. Individual Income Tax Return. line 59b. If the home is sold or ceases to be the principal residence, the remaining credit is recaptured in the year of sale, and cannot exceed the gain on the disposition. Those repaying the credit as a result of discontinued use as their principal residence will need to file Form 5405, First-Time Homebuyer Credit and Repayment of the Credit with their 2011 tax return.
About Liberty Tax Service
Liberty Tax Service is the fastest growing retail tax preparation company in the industry’s history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service (http://www.libertytax.com) has prepared over 9,000,000 individual income tax returns.