Homeownership comes with serious benefits. It can protect you from inflation, help you build wealth, and can even qualify you for valuable deductions and credits.
Want to make sure you’re taking full advantage of the tax perks you’re eligible for? Read more to learn which homeowner deductions you’ll want to consider.
1. Mortgage interest deductions
In most cases, you can deduct any interest you pay on your mortgage loan.
According to Embrace Home Loans, you can deduct up to $75,000 in total debt or $375,000 if you’re married and filing returns separately.
You can even write off interest paid on second home mortgages.
2. Property taxes
Some homeowners can deduct their entire property tax bill. Sounds too easy, right? There’s a catch.
To do this, you must itemize your returns and your taxes as well as any other state and local tax deductions you’re taking. And this can’t exceed $10,000.
3. Home office
If you work from home, you may be able to write off your home office costs. This includes things like electricity, Wi-Fi, a portion of a mortgage payment, home insurance, and so much more.
This works if you use the space as your principal place of business or substantially and regularly if you work outside of the home.
4. HELOC
If you took out a home equity loan, the interest you paid on that loan may be deductible.
But this only applies if you used funds to improve the value of your property. This includes making repairs, upgrading, and renovating.
5. Energy-efficient upgrades
Have you ever heard of the residential energy-efficient property tax credit? This is where you can offset some of the cost of installing solar panels, a wind turbine, or a solar heater.
The credit depends on when you install the system but can range from 22%-30% of the cost and is directly applied to your annual tax bill.
This means that it will lower what you owe and not your taxable income.
6. Mortgage credit
You might qualify for a mortgage credit certificate if you meet certain income requirements.
These offer a dollar-for-dollar credit toward your tax liability based on the mortgage interest you pay annually.
7. Discount points
If you bought a home and paid discount points to lower the interest rates, then you have another deduction option.
Points are basically pre-paid interest. They’re considered write-offs just like mortgage interest is.
All you do is deduct the full total you spent on mortgage points at closing and reduce your tax liability accordingly.
8. Tax deductions for capital gain
If you sold a home before buying a new one, you may be able to write off your profits.
If you made $250,000 or less on your home sale ($500,000 if married filing jointly with your spouse), then your capital gains will not count as income.
However, keep in mind that the home must have been your primary residence at least two out of the last five years prior to the sale.
9. PMI
Are you paying private mortgage insurance as part of your mortgage loan? You can deduct this too.
If you make $100,000 or less, you can deduct the entire year’s mortgage insurance premiums. If you make between $100,000 and $109,000, you can write off 10%-90% of premiums.
10. Consult with a tax pro
Not all homeowners will be eligible for everything. And there may even be more tax perks you qualify for.
Make sure to consult with a professional or financial advisor for personalized guidance on filing your taxes.
