Despite extensive speculation that mortgage interest deductions might be on the chopping block, no one in Congress could summon the political will to make this happen, and everyone connected with the real estate industry in America sighed with relief. The tax agreement retains the home mortgage interest deduction.
Mortgage insurance deduction
The tax legislation extended a provision that allows homeowners to deduct mortgage insurance (MI) premiums through 2011. To qualify for the full deduction, your adjusted gross income (AGI) cannot exceed $100,000. You can claim a partial deduction if your AGI falls between $100,000 and $109,000. You can't deduct mortgage premiums on home loans that closed before 2007. The Mortgage Insurance Cos. of America estimates that homeowners who pay MI and qualify for a full deduction will save $300 to $350 a year, according to a USA TODAY report.
Energy-efficient home improvements
You can still get tax credits for making your home energy efficient, but they won't be as generous after this year. If you installed insulation, new windows or other energy-saving improvements in 2010, you can claim a tax credit of up to 30 percent of the cost with a lifetime maximum of $1,500.
If you didn't get it done in 2010, you'll still be able to claim a credit in 2011, but only up to a lifetime maximum of $500. Caps for specific projects also apply. For example, there is a limit of $200 for energy-efficient windows, according to USA TODAY.
Don't itemize? Your tax credit expired!
The tax break for homeowners who don't itemize was not extended. Homeowners who did not file Schedule A (usually the less affluent) were allowed to increase their standard deduction by the amount of their state and property taxes, up to $500 for single homeowners or $1,000 for married couples. Unfortunately, Congress did not extend this break so it won't apply beginning with 2010 tax returns.