When our water heater let go a couple of years ago, our homeowners' insurance paid for almost all of our home's very extensive repairs.
I was sure that when our policy came up for renewal, we'd face a huge premium increase. We didn't.
Now, however, after hundreds of homes across Texas have been destroyed or damaged by wildfires, I'm again thinking that insurance companies might bump up their prices.
If our renewal is more next summer, so be it.
Even if our mortgage company didn't demand it, we'd still get a homeowners' hazard insurance policy. We have to have it.
I learned that with the water heater. That lesson was reinforced by the recent wildfires in our area.
No tax break for hazard insurance: While homeownership offers many tax breaks, your property's hazard insurance premiums are not among them.
The Internal Revenue Service specifically says you cannot deduct property insurance, including fire and comprehensive coverage, and title insurance.
Some tax breaks for mortgage insurance: If, however, you pay private mortgage insurance (PMI), you might be able to deduct some of those premiums.
PMI premiums can be deducted if your adjusted gross income falls below a certain level. The deduction phases out as on AGI between $100,000 and $109,000; the phaseout range for married taxpayers filing separate returns is between $50,000 to $54,500.
Also, this deduction only applies to mortgages obtained in 2007 or later to purchase, not refinance, a home. And unless Congress extends it, this itemized deduction option will expire at the end of 2011.
Ever changing home related tax breaks: Homeowners can take advantage of a lot of tax breaks. But Congress keeps tweaking real estate related tax code sections, causing even more taxpayer confusion.
One tax break that was briefly extended to homeowners who don't itemize deductions was the write-off for real estate taxes, aka the property tax bill you pay your county every year.
So while property taxes are still deductible, you have to file a Schedule A to claim them.
Speaking of Schedule A, below is a look at the taxes and interest sections of that form (it's clipped from the latest 2011 tax year draft version) where you claim your eligible home-related tax breaks:
Click image for a larger view.
The future of tax breaks for home owners: Will the long list of home-related tax breaks change? Probably to some degree. Congress just can't help itself.
Will they change this year? Maybe.
It all depends on political agendas, housing industry lobbyists and the recommendations of the special bipartisan deficit reduction committee that begins meeting this week.
Homeowners, and all of us, stay tuned.
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