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There are a number of homeowner tax incentives that could potentially lower your taxable income and result in significant savings. Let’s take a closer look at some of the most common homeowner tax breaks that could benefit you this year.
Mortgage Interest Deduction Homeowners who itemize may be able to take advantage of a hefty tax deduction for the interest paid on their mortgage. The amount you can deduct depends on when you took out your loan, and can vary from $750,000 to $1 million. If your loan predates October 14th, 1987, you may be able to deduct all of your interest payments.
Discount Points If you’re within the limit to deduct all your mortgage interest, you may also be able to deduct the discount points you paid when the loan closed. However, it’s important to note that loan origination points do not qualify for a deduction.
Renovation Costs When determining your medical expense deductions, you may include the cost of installing healthcare equipment or other medically-required home improvements that benefit you and your household. Additionally, modifications that make a home more accessible can be fully deducted.
Home Office Expenses If you’re self-employed and use part of your home regularly and exclusively for business purposes, you may be eligible to deduct home office expenses. The IRS website provides information on how to determine if your space qualifies for a tax deduction, as well as worksheets for calculating the amount.
Property Taxes You may deduct a maximum of $10,000 ($5,000 if married and filing separately) for the combination of property taxes, state, and local income taxes, or sales taxes when filing your personal income taxes.
Multi-Family Residence Deductions People who purchase and operate rental properties can take advantage of various tax deductions that differ from those available for a primary residence owned by the homeowner. These include asset depreciation, repairs, and operating expenses.
It’s important to note that tax deductions can only amount to significant savings if the sum of all your deductions exceeds the IRS’s standard deduction for the tax year. Be sure to keep accurate records and consult with a tax professional to ensure you’re taking advantage of all possible deductions.