Hi! I’m Bette Hochberger, CPA, CGMA. Owning a home comes with many perks, and one of the biggest benefits comes during tax season. As a homeowner, you may qualify for a variety of tax deductions that can save you a significant amount of money. Understanding these deductions can help you make the most of your investment and keep more money in your pocket. For today’s #TaxTipTuesday, I’ll break down the most common tax deductions for homeowners!
Mortgage Interest Deduction
One of the biggest tax breaks for homeowners is the mortgage interest deduction. If you have a mortgage on your home, you can deduct the interest you pay on it, up to a loan balance of $750,000 (for loans taken out after December 15, 2017). This deduction can translate into thousands of dollars in savings, especially in the early years of your mortgage when payments are interest-heavy.
Property Taxes
Another major deduction is for property taxes. Homeowners can deduct up to $10,000 in state and local property taxes (or $5,000 if married filing separately). This deduction is especially valuable for those living in areas with high property taxes.
Home Office Deduction
If you work from home, you may qualify for the home office deduction. This allows you to deduct a portion of your home expenses, such as utilities, internet, and even depreciation, based on the percentage of your home used exclusively for business purposes. Make sure your workspace meets the IRS requirements for this deduction.
Energy-Efficient Home Improvements
Thinking of going green? You may be eligible for tax credits and deductions for making energy-efficient home improvements. For example, installing solar panels, energy-efficient windows, or upgrading your HVAC system can qualify you for federal tax credits under the Residential Clean Energy Credit. These credits can cover a percentage of the cost of these upgrades, helping you save money while reducing your environmental impact.
Points Paid on Your Mortgage
If you paid points when you took out your mortgage (essentially prepaid interest), you may be able to deduct those points on your tax return. In most cases, points are fully deductible in the year they were paid, but there are specific rules to qualify, so make sure to confirm with a tax professional.
Home Sale Exclusion
If you sell your home, you could qualify for the home sale exclusion, which allows you to exclude up to $250,000 of profit from your taxable income ($500,000 if married filing jointly). To qualify, the home must have been your primary residence for at least two of the five years before the sale.
Homeownership isn’t just about having a place to live—it’s also a great way to save on taxes! From deducting mortgage interest and property taxes to taking advantage of credits for energy-efficient upgrades, there are many ways to reduce your tax burden as a homeowner. Be sure to keep good records, consult a tax professional if needed, and make the most of these deductions to maximize your savings.
I’ll see you next time!
