Here is a list of the itemized tax deductions available to the average homeowner. Every year, you are permitted to deduct the following expenses:

Taxes. Real property taxes, both state and local, can be deducted. The one exception referenced above: tax filers can deduct on Schedule A any combination of state and local property taxes and income or sales taxes but only up to a total of $10,000. Interestingly, married couples who file their own separate tax return can only deduct up to $5000.

However, it should be noted that real estate taxes are only deductible in the year they are actually paid to the government. Thus, if in year 2018, your lender held in escrow moneys for taxes due in 2019, you cannot take a deduction for these taxes when you file your 2018 tax return.

Mortgage lenders are required to send an annual statement to borrowers by the end of January of each year, reflecting the amount of mortgage interest and real estate taxes the homeowner paid during the previous year.

Mortgage Interest. A major benefit of homeownership is the fact that you can deduct your mortgage interest on your taxes.

There are monetary limits to the total amount of debt, of course: Interest paid throughout the year is deductible on your taxes for mortgages up to $1 million for a loan issued prior to Dec 14, 2017, and up to $750,000 for any loans issued after that date. The limits count as your total housing-related debt, including the mortgage on your home, a mortgage for a second home or home equity loan or line of credit.

At the start of tax season, you should receive a 1098 form from your mortgage servicer. This form helps make the mortgage interest deduction process easy because it specifies the amount of interest you paid throughout the year.

In the same way it contributes to your total mortgage debt, the interest on a refinanced mortgage can also be deductible, following the debt limitations depending on when it was issued.

Home Equity Line of Credit Interest. In line with your mortgage interest, the interest on a home equity loan or home equity line of credit can also be deducted when you file your taxes.

Following the reform for 2018, if you borrow against the equity in your home, the interest deduction is subject to the same $750,000 limit for total mortgage debt and only applies when the money borrowed goes toward the home itself. While you can no longer deduct interest for a HELOC to pay for personal property like a car, if you used a home equity line of credit to pay for improvements on your home like an addition or new kitchen, it’s still deductible.

Points. Because mortgage rates are still considerably low, not too many borrowers are paying points. When you obtain a mortgage loan, in order to get a lower rate mortgage, you would pay one or more points. Whether referred to as “loan origination fees,” “premium charges,” or “discounts,” these are still points. Each point is one percent of the amount borrowed; if you obtain a loan of $800,000, each point will cost you $8,000. And the interest rate on your loan will be lowered.

The IRS has also ruled that even if points are paid by sellers, they are still deductible by the homebuyer. Points paid to a lender when you refinance your current mortgage are not fully deductible in the year they are paid; you have to allocate the amount over the life of the loan. For example, you paid $8,000 in points for a 30 year loan. Each year you are permitted to deduct only $266.66 ($8,000 divided by 30); however, when you pay off this new loan, any remaining portion of the points you have not deducted are then deductible in full.

The above information is for informational purposes only. Consult your financial advisor before making any final decisions.