Today is Tax Day, which makes it an appropriate time to talk about tax matters. We already covered homeowner tax deductions last month, so here's a roundup of some persistent myths about taxes and home ownership.

While it's a bit late to use this information on this years' tax return, it's useful information for anyone who's thinking of buying a home or even selling one.

1 - You get a big tax deduction from mortgage interest

The fact is, not everyone sees a benefit from the mortgage interest tax deduction. What many don't realize is that you can only take the deduction if you itemize - and you have to choose between either itemizing or taking the standard deduction available to all taxpayers. For 2014, the standard deduction is $6,100 for a single filer and $12,200 for a couple filing jointly - so unless your mortgage interest and other deductions are at least that much, you're better off taking the standard deduction.

Even if you can itemize, you may not save that much. If your itemized deductions are only $3,000 more than the standard deduction and you're in the 25 percent tax bracket, you're only saving $750 compared to what you'd get with the standard deduction. Not a bad chunk of change, but not a huge savings either.

Remember too that your interest payments shrink over time as you pay down the loan. So at some point, it's going to lose its advantage over the standard deduction.

2 - Home improvements are deductible

Nope - far from it. That new roof, the patio, the extra bedroom you added - none of those costs are tax deductible. They're simply improvements you did to your home.

The confusion may arise from the fact that you can deduct the cost of improvements from any capital gains you may have to declare when you finally sell the home - more on that later. But the improvements themselves are not tax-deductible.

You can't even deduct the cost of improvements made to a rental property you may own, even though you consider it a business expense. To the IRS though, that's an enhancement to the value of the property you'll eventually recover, though you can depreciate it over time. Repairs, on the other hand, are considered part of maintaining the property and are deductible on rentals, but not your own residence.

The one exception to this rule is certain energy-efficiency improvements you may make for which special deductions are allowed - installing a high-efficiency furnace, new windows, insulation, etc.

3 - Insurance is deductible

Again, this is one that takes many new homeowners by surprise. It may be that they're assuming it's deductible in the same way mortgage interest and property taxes are - after all, it's a required part of having a mortgage and is billed as part of your monthly mortgage statement, just as interest and taxes are.

Private mortgage insurance (PMI), on the other hand, is deductible for certain borrowers. This is the insurance you pay on a Fannie Mae or Freddie Mac mortgage when you put less than 20 percent down. It's tax deductible only if you took out your mortgage in 2007 or later - and the deduction expired with the 2013 tax year. Congress may choose to extend it, but that's far from certain.

4 - Losses on the sale of a home are deductible

This is one that shocks a lot of people. Given that you can write off so many other financial losses, you'd think that someone who ended up selling their home for less than they paid for it could write off the difference. Again, sorry, but no.

The reason is that your home is considered personal property, like an automobile. Of course, people expect an automobile to depreciate over time, while a home is expect to increase or hold its value. But the reasoning is the same, at least for tax purposes.

With so many people still underwater on their mortgages after the downturn, this is just one other factor that makes it harder for them to cut their losses, sell the property and move on.

5 - You need to buy a new home to avoid capital gains taxes on the old one

One of the great ironies of the tax code is that those who suffer a big loss in selling their home don't get a tax break while those who realize a big gain get a very nice one. Many people still assume that if you realize a capital gain when you sell your home, you have to pay taxes on it unless you immediately turn around and use those gains to buy another home. That used to be the case but not anymore.

The current rule is that you are exempt from taxes on up to $250,000 in capital gains on the sale of your residence for a single person and $500,000 for a couple filing jointly. The one stipulation is that you must have lived in the home for at least two of the past five years, which need not have run concurrently.

The rule changed in 1997 but many people still haven't caught on.

Published on April 15, 2014