It’s that time again. Tax season is upon us! This year there are a load of tax deductions for homeowners you might know and some you might not.
Digging into these benefits might have you itemizing deductions, instead of filing for the standard. This will benefit you as long as your itemized deductions outweigh the standard deduction. Check in to whether you qualify for these tax deductions!
#1. Mortgage Interest
The biggest tax deduction for homeowners is the mortgage interest deduction. This will be the amount of interest you pay on your home loan for the year. This can be really lucrative for new homeowners, as their payments go more toward the interest in the first years of a home mortgage. You can deduct up to $750,000 if you are filing jointly or alone and up to $375,000 if you are filing separately and are married.
#2. Mortgage Points
When you bought your mortgage, did you purchase mortgage points or “discount points”? They are often bought to lower the interest on the mortgage. This money is considered prepaid interest by the IRS! Look out for line 8 of your 1040 Schedule A and add the amount paid for your total mortgage interest there.
#3. Property Taxes
First, know how much your annual property tax payments were in 2022. They might be listed on box 10 of form 1098 from your mortgage lender. Then, put in your total amount of real estate taxes you paid for the year in line 5b of the 1040 Schedule A.
#4. Home Office Expenses
Own your own business or side gig you run out of your home? You can deduct business expenses based on how much space of the home is dedicated to that business. Use form 8829 to calculate the percentage used.
The easy way is to use a standard home-office deduction, which is based on $5 per square foot.
#5. Going Green
Did you make energy-efficient improvements to your home in 2024? You can get 30% of your solar installation costs back as a tax credit. This also applies to wind, solar water heating, biomass fuel systems, fuel cell property, and geothermal heat pumps! There are 2 types of tax credits though. Be sure you are filing for the right one that applies to your situation.
#6. Selling Your Home for Profit
Did you make some money on selling your home in 2024? Those are considered capital gains that you could potentially keep with no tax obligations. The important thing is that you lived in the house for 2 of the last 5 years. It is not available for fix and flippers.
#7. Home Improvements for Medical Needs
Did you install accessibility ramps, railings, lifts, or other home improvements out of medical necessity? Any of those and more can be deducted. Make sure you keep all your receipts and report them on line 1 of your 1040 Schedule A.
What Is Not Tax Deductible?
- The Down Payment or Mortgage Payments toward the Loan Principal
- Homeowner’s or Fire Insurance
- Depreciation of the Home’s Value
- Utility costs like Electricity, Gas, and Water
- House Maintenance or Cleaning
Final Thoughts for Tax Deductions for Homeowners
We hope this blog helps you in your hunt for tax breaks and a smooth tax season! If you are curious about saving money on your taxes with insurance benefits, please give Greg Fay Insurance a call. We have agents standing by ready to help you sort out what can be deducted and what cannot.
