Tax Benefits of Owning a Home
Homeownership has its share of ups and downs; however, it’s crucial to capitalize on all the good—especially applicable tax benefits!
Continue reading as we cover six common tax benefits for homeowners in today’s blog.
- Mortgage Interest Deduction:
According to experts at NerdWallet, “mortgage interest deduction allows you to reduce your taxable income by the amount of money you’ve paid in mortgage interest during the year.” More specifically, homeowners that purchased a home after December 15, 2017 may deduct the mortgage interest paid during the tax year on the first $750,000 of mortgage debt for a primary home or second residence.
According to U.S. News & World Report, it’s essential to understand that “you must itemize on your Schedule A, instead of taking the standard deduction to take advantage of this homeowner tax deduction.” Therefore, mortgage interest tax deduction may not be an option for every taxpayer.
Read IRS Publication 936 to learn more about the specific items that qualify as mortgage interest.
- Property Tax Deduction:
The IRS provides homeowners the opportunity to reduce their taxable income by up to $10,000 in deductible property taxes, state and local income taxes, and sales taxes.
Property tax (also known as ad valorem tax) is the tax placed on real estate, as determined by your local government. The amount owed is typically determined by two factors: 1) where the property is located and 2) how much the property is worth.
- Home Equity Debt:
According to the IRS, “interest paid on home equity debt may be deducted only if the money is used to buy, build or substantially improve the taxpayer’s home that secures the loan.” For example, the interest would be deductible if the home equity debt is put towards home renovation or repairs, but would not be deductible if the funds are used to pay off credit card debt.
- Home Office Expenses:
If you’re self-employed and part of your home is used exclusively as your place of business (or to meet clients/customers), it may be possible to deduct expenses for your home office.
Learn more about self-employment tax benefits here.
- Renewable Energy Tax Credits:
Tax credits are available for homeowners who purchase and install items that generate electricity utilizing the sun, wind, or fuel cells. The renewable energy tax credit also applies to those who invest in solar water heaters and geothermal heat pumps.
- Medically Necessary Home Improvements:
Homeowners may deduct the cost of medically necessary home improvements, as well as the installation of medical equipment, as long as the direct beneficiary is the homeowner him/herself, a spouse, or dependent that lives at the residence.
Learn more about how to properly claim medical expenses on your taxes, here.
As the deadline to complete your taxes for 2019 nears, make sure to consult with your local accountant or preferred tax service to learn more about all of the tax incentives available to homeowners in your state.
At GoPrime Mortgage, Inc., we pride ourselves on serving the communities we live in by making affordable homeownership possible through personal service and individualized solutions. Contact our team of local lenders today to see how we can help you achieve the dream of homeownership.