As the year wraps up, it’s the perfect time to take advantage of potential homeowner tax deductions that could lead to meaningful savings. From mortgage interest to energy-efficient upgrades, there are deductions that may apply to many homeowners, helping to reduce taxable income. Let’s explore the key homeowner tax deductions you should consider before the calendar turns.
Mortgage Interest Deduction
For many homeowners, the mortgage interest deduction is one of the most valuable tax benefits. If you have a mortgage on your primary or secondary home, the interest you paid over the year might be deductible. This can be particularly beneficial during the early years of a mortgage when interest payments are higher. Be sure to review your Form 1098 from your lender, which outlines the total interest paid.
Property Tax Deduction
Homeowners can often deduct the property taxes they’ve paid throughout the year. This deduction applies to state and local property taxes, though it’s capped at $10,000 for combined state and local taxes, including income or sales taxes. Keeping records of your property tax payments is essential to claim this deduction.
Home Office Deduction
For those who work from home, a dedicated home office space may qualify for a deduction. The home office must be used exclusively and regularly for business purposes. Eligible expenses include a portion of utilities, internet, and even maintenance costs for the home office space. Check IRS guidelines or consult a tax professional to ensure you meet the requirements.
Energy-Efficient Home Improvements
Homeowner tax deductions apply to homeowners who made energy-efficient upgrades and may qualify for specific tax credits. The Residential Clean Energy Credit, for example, applies to renewable energy installations like solar panels or geothermal systems. Smaller upgrades, such as energy-efficient windows or appliances, might also qualify for credits or deductions, encouraging sustainability while offering financial incentives.
And the Inflation Reduction Act (IRA) that was passed by our government a few years ago allows for more homeowner tax deductions. This link will provide you more information
Private Mortgage Insurance (PMI) Deduction
If you’re paying private mortgage insurance, you might be eligible to deduct those premiums. This deduction is particularly relevant for homeowners who made smaller down payments and are required to carry PMI. There are income limits to this deduction, so review your eligibility before claiming it.
Before filing your taxes, gather all relevant documentation and consider consulting a tax professional. Understanding these homeowner tax deductions can make a big difference in your financial planning as a homeowner.
Maximize the benefits of owning and not renting. Once you know these ins-and-outs, you’ll prepare yourself for future real estate investing.
