Powers of Deduction

For those weighed down by large mortgage payments, there are ways to save money when next year’s tax season arrives; beekeeping, anyone?

By ANYA MARTIN

One rueful lesson of tax season: Some deductions require lots of advance planning. Homeowners willing to do the legwork now can find some creative ways to lessen their tax bills next year.

Jumbo-mortgage holders can only deduct annual interest payments on up to $1 million of debt that they take to buy, build or improve a home. They can also deduct interest on up to $100,000 of equity-line or equity-loan debt.

Homeowners who rent their primary residences for fewer than 15 days a year don’t have to report rental income on their federal returns. Getty Images
But federal and state income taxes, as well as property taxes, offer a variety of exemptions, deductions and credits that can save money for luxury homeowners, according to certified financial planners. Here are some examples:

Rent your home for two weeks. Homeowners who rent their primary residences for fewer than 15 days a year don’t have to report rental income on their federal returns. That can be a hefty sum if the rental is a luxury home in a prime location, says Robert Walsh, founder and president of Red Bank, N.J.-based Lighthouse Financial Advisors.

For example, Mr. Walsh has a client who nets around $15,000 for renting a home on New York’s Long Island for 14 days every summer. Another client rents his house in the ski country of Killington, Vt., once a year to his company for an employee retreat and party. “The company gets a tax deduction, and he gets the rental money,” Mr. Walsh says.

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