Homeownership comes with financial perks, notably tax benefits, making it a cornerstone of the American dream. But does Uncle Sam push you to own a home? Not quite. However, the real estate industry passionately lobbies for tax benefits that empower homeownership. Despite the Tax Cuts and Jobs Act doubling the standard deduction, tapping into itemized deductions like mortgage interest and property taxes became less beneficial for many, particularly those in higher income brackets.
Maximizing homeownership-related tax benefits is crucial. While not everyone reaps significant tax savings, perks like the home office deduction and mortgage credit certificates can bring substantial advantages, irrespective of itemization status. Let’s delve into how these deductions function and explore key tax breaks homeowners should know.
1. Mortgage Interest Deduction
Deduct the interest paid on mortgage debt up to $750,000 ($375,000 if married filing separately). This deduction allows homeowners to save on the interest portion of their mortgage payments.
2. Real Estate Taxes
Deduct state and local property taxes up to $10,000 per year ($5,000 if married filing separately). This deduction eases the burden of property tax payments, providing relief to homeowners.
3. Discount Points
Deduct points paid when taking out a mortgage, reducing interest rates. Points paid upfront to lower interest rates result in immediate tax benefits for homeowners.
4. Private Mortgage Insurance
Deductible insurance premiums for specific loans, subject to income limitations. This deduction supports homeowners by making mortgage insurance costs more affordable.
5. Home Office Deduction
For business owners using part of their home regularly and exclusively for business purposes. This deduction helps entrepreneurs save on home-related expenses related to their businesses.
6. Medically Necessary Home Improvements
Deduct costs for medically necessary home modifications, if itemizing. These deductions aid in easing the financial burden of essential home alterations for medical purposes.
7. Home Sale Exclusion
Capital gains exclusion up to $250,000 for singles and $500,000 for married couples selling their primary residence. This exclusion ensures homeowners keep more of their profits from the sale of their homes.
8. Moving Expenses for Armed Forces
Deductible moving expenses for military members with permanent change of station orders. This deduction provides financial relief for military personnel when relocating.
9. Tax Credits for Energy Efficiency
Nonrefundable credits for alternative energy improvements to the home. These credits promote energy-efficient home upgrades by offering financial incentives.
10. Mortgage Credit Certificate
Offers tax credits for low- to moderate-income and first-time homebuyers. This credit provides additional financial assistance for qualifying individuals, making homeownership more accessible.
Whether you’re navigating your first home purchase or considering the advantages of homeownership, understanding these tax benefits is pivotal. Our experts are here to guide you through the process and help maximize these advantages for your financial well-being.
If you’re ready to capitalize on these advantages and save money through homeownership, our experts are here to help. Contact us today to explore your options and find your dream home while maximizing your tax benefits.
Disclaimer: Always consult a tax professional for personalized advice.