Tax Deductions For Home Owners
Now that we are past the start of a new year, tax season is upon us. If you own a home, your tax burden can be significantly lessened with homeowner tax benefits. While there are commonly known tax benefits, there are also many lesser-known ones that it could pay to take advantage of. This is especially true with the extension of many tax benefits, which were approved at the end of 2015. The following homeowner tax deductions are worth checking out before you file.
Perhaps the most well known deduction is the one for your mortgage interest. If you have a loan on your home, you can deduct the interest you pay in a year on your mortgage. This applies to loans with a balance of up to $1 million.
If you purchased your home in 2007 or later, and carry private mortgage insurance, you have another big deduction you may be able to claim. This deduction is for the payments you have made toward the mortgage insurance, which protects the lender from a defaulted loan. There are income limits for this deduction however. If you are married and filing jointly your combined gross income can’t exceed $109,000, or $54,500 if filing separately.
The other big tax benefit most people know of is regarding property taxes. You can include your state and local property taxes as deductions, the amount you can claim will depend on when you pay the tax - so if you can, pay it early.
Should you have sold your home within five years of buying it, you most likely will have to face a capital gains tax. But did you know there is a way this tax can be negated? If the money gained in selling your home is less than $250,000 as a single tax filer or $500,000 if filing jointly, you may qualify to waive the capital gains tax. You must have lived in your home for at least two of the five years as your primary residence however.
If you or someone living in your home has medical needs, which lead to upgrades being done in your home, you may qualify for a tax deduction. If you install a lift or ramp, or upgrade a bathroom for wheelchair use for example, you may have a deduction on hand. You can only deduct a portion of these costs, generally speaking whatever cost you pay that is above the increased value of your home due to the improvements.
If you have a dedicated home office space, you may be able to deduct it under the home office expense rule. It need not be an entire room either. There is now a quick deduction option when it comes to home offices, but if you are not sure how to apply the deductions, seek the assistance of a tax advisor before you file.
A lesser-known tax deduction applies to homeowners who rent out their house for 14 days or less within a year. If
you live where a big event is taking place for example, like one of the Bowl games, the income received from renting a room or two could be tax-free.
If you have made any energy efficiency upgrades to your home in the last year, be sure to include them in your tax preparation. There are often deductions available for improvements such as energy star appliances, or new high efficiency windows being installed.
Be sure to itemize your deductions and keep all receipts and documentation with your filed taxes. Using the services of a tax advisor is also a big plus and recommended especially for homeowners. You can also review a complete list of homeowner deductions from the IRS with their Publication 530.
I am proud to be a part of this amazing community, and I am proud to be able to make the real estate process move smoothly for my clients. I am here to help with all of your real estate needs. If you’re looking for a warm and engaging professional to help you with the purchase or sale of your home, contact me today at 407-234-5313 or by email: Jeff@JeffRoyle.com.