3 last chance home tax deductions for 2013

Three home tax deductions are going away after 2013, so plan to take advantage of them now.

If you’re eligible, tax year 2013 is probably the last time to claim the private mortgage insurance (PMI) deduction, the energy tax credit, and debt forgiveness benefit, all of which all expire on Dec. 31, 2013.

Here's what you need to know about those expiring benefits as you ready your taxes:

PMI Deduction

This tax rule lets you deduct the cost of private mortgage insurance, which is what you pay your lender each month if you put down less than 20% on a home. PMI protects the lender if you default on the home loan. Your deduction could amount to a couple hundred dollars depending on your tax bracket and other factors. Find out if you qualify for and how to take the PMI deduction. Of course, if you're wise enough not to be paying PMI, you aren't deducting it anyway.

Energy-Efficiency Upgrades

This sweet little tax credit lets you offset what you owe the IRS dollar-for-dollar for up to 10% of the amount you spent on certain home energy-efficiency upgrades, from insulation to water heaters. On the downside, the credit is capped at $500 (less in some cases). But on the bright side, the right improvement could lower your utility bills indefinitely.

Debt Forgiveness

When you go through a short sale, foreclosure, or deed-in-lieu, your lender sometimes lets you off the hook for some or all of what you owe on your mortgage. That forgiven mortgage debt is considered income, on which you’d typically have to pay income tax.

Suppose you’re in financial distress and your lender agrees to let you short-sell your home, say for $50,000 less than you owe on the mortgage, and forgive you for the balance. Without the protection of the Mortgage Debt Forgiveness Act, you’ll owe income tax on that $50,000.

It’s likely if you had the money to pay income tax on $50,000, you’d have used it to pay your mortgage in the first place.

Although these expiring tax benefits were renewed retroactively in past years, that is not likely to happen in 2014 because many in Congress would like to see comprehensive tax reform rather than scattershot renewals of individual provisions. [where: 75230]