As a homeowner, you’re entitled to a range of tax deductions that can significantly reduce your tax liability. Understanding these deductions and how to claim them can save you a substantial amount of money come tax season. This comprehensive guide will delve into the various tax-deductible expenses for homeowners, providing you with the knowledge to maximize your tax savings.
Mortgage Interest Deduction
One of the most significant tax deductions for homeowners is the mortgage interest deduction. This deduction allows you to reduce your taxable income by the amount of interest you pay on your mortgage loan. The limit on the deductible mortgage interest varies depending on when you took out the loan:
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Loans originated on or after December 16, 2017: Up to $750,000 of mortgage debt ($375,000 for married couples filing separately)
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Loans originated between October 14, 1987, and December 15, 2017: Up to $1 million of mortgage debt ($500,000 for married couples filing separately)
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Loans originated on or before October 13, 1987: All mortgage interest is deductible
To claim the mortgage interest deduction, you must itemize your deductions on your tax return. You can find the amount of mortgage interest you paid on Form 1098, which your mortgage servicer will send you annually.
Home Equity Loan Interest Deduction
If you have a home equity loan or home equity line of credit (HELOC), you may also be able to deduct the interest you pay on these loans. However, this deduction is only available if you use the borrowed funds to improve your home. The interest on home equity loans and HELOCs is subject to the same limits as mortgage interest.
Property Taxes
Property taxes are another deductible expense for homeowners. You can deduct up to $10,000 of property taxes ($5,000 for married couples filing separately) in combination with state and local income taxes or sales taxes.
To claim the property tax deduction, you must itemize your deductions. You can find the amount of property taxes you paid on your property tax bill.
Home Office Expenses
If you’re self-employed and use part of your home exclusively and regularly for business purposes, you may be able to deduct home office expenses. You can use the simplified method or the actual expense method to calculate your home office deduction.
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Simplified method: Deduct $5 per square foot of your home used for business, up to a maximum of 300 square feet.
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Actual expense method: Deduct the actual expenses associated with your home office, such as mortgage interest, property taxes, utilities, depreciation, and repairs.
To claim the home office deduction, you must meet the following requirements:
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You must use part of your home exclusively and regularly for business purposes.
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The business use must be the primary use of the space.
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You must own or rent the home.
Medically Necessary Home Improvements
When calculating your medical expense deductions, you can include the cost of installing health care equipment or other medically necessary home improvements that benefit you, your spouse, or a dependent. Permanent improvements that increase your home’s value are only partially deductible. The deductible cost is reduced by the amount of the property value increase.
Many improvements to make a home more accessible, such as constructing entrance ramps, widening doorways, or installing railings and support bars, usually don’t increase the value of a home and can be fully deducted.
Non-Deductible Homeowner Expenses
While many expenses related to homeownership are tax-deductible, there are some notable exceptions:
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Costs for getting or refinancing a mortgage, such as loan assumption, credit report, and appraisal fees
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Depreciation
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Forfeited deposits, down payments, or earnest money
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Home insurance premiums
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Homeowner association fees
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Internet system or service
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Mortgage insurance
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Rent for living in the home before closing
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Transfer taxes or stamp taxes
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Utilities
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Wages for domestic help
Taking advantage of the tax deductions available to homeowners can significantly reduce your tax liability. By understanding which expenses are deductible and how to claim them, you can maximize your tax savings and keep more of your hard-earned money. Remember to consult with a tax professional if you have any questions or need guidance on your specific situation.
Top 5 Tax Deductions for Homeowners| MAXIMIZE Your Tax Refund
FAQ
What is the biggest tax deduction available to homeowners?
What is tax deductible when you own a home?
What home bills are tax deductible?
What house payments are tax deductible?
Are there tax deductions for homeowners?
Fortunately, there are tax deductions for homeowners that can help to ease the financial burden a bit. Good news: the IRS offers several tax breaks for homeowners, from deductions for the interest on your mortgage to credits if you improve your home’s energy efficiency in certain ways.
Are home expenses tax deductible?
A tax-deductible expense lowers your taxable income, so you’ll pay less in income tax. Homeowners can often deduct interest, property taxes, mortgage insurance, and more on taxes. You can’t deduct certain home expenses, such as homeowners insurance or costs of refinancing.
Can you deduct housing expenses as a homeowner?
As a homeowner, you won’t be able to deduct all of your housing expenses. If you have questions about what you cannot deduct, take some time to consult with a tax professional. The IRS has extensive rules about the tax breaks available for homeowners. Let’s dive into the tax breaks you should consider as a homeowner. 1. Mortgage Interest
Are mortgage payments tax deductible?
Here are the tax deductions for homeowners to include in the calculation. This is usually the biggest tax deduction for homeowners who itemize. A portion of every mortgage payment goes toward interest on the loan. You can deduct the interest you paid up to a limit, which depends on when you took out the mortgage.