7 Tax Benefits of Owning a Home
7 Tax Benefits of Owning a Home
We’ve all heard about great tax benefits of owning a home, but what are they exactly? Homeowners and prospective homeowners might be wondering what breaks might be headed their way as they’re filing away this tax season. Well, look no further than this complete guide to all the tax benefits of owning a home – for this filing year (2017) as well as the next (2018).
TAX BREAK #1: Mortgage Interest
This one is a biggie; homeowners have the ability to deduct the interest on a mortgage of up to $1 million. And the more recent your mortgage, the greater your tax savings.
2018 Changes: The new tax bill allows homeowners with a mortgage that went into effect before Dec. 15, 2017, to continue to deduct on loans up to $1 million, but for anyone who closed on a mortgage after that, the cap for deducting interest becomes $750K, including a combined total for first, second, and any other homes.
TAX BREAK #2: Property Taxes
In most instances, property taxes are deductible on your 2017 tax return, which could mean some hefty savings for homeowners.
2018 Changes: For the next filing year, property tax will no longer be a separate deduction. Instead, taxpayers can take one deduction that includes property tax as well as state and local sales and income taxes. Also note that the one deduction is capped at $10,000 for those married filing jointly.
TAX BREAK #3: Private Mortgage Insurance
If you put less than 20% down on your home, odds are you’re paying private mortgage insurance, which costs from 0.3% to 1.15% of your home loan. While the deduction had expired, the new tax bill retroactively made the deduction available for the 2017 tax year.
2018 Changes: This deduction is for itemizers only. Plus, the 2018 tax law nearly doubles the standard deduction. As a result, it is estimated that only about 5% of taxpayers will itemize deductions starting in 2018.
TAX BREAK #4: Energy-Efficiency Upgrades
The Residential Energy Efficient Property Credit was a tax incentive for installing alternative energy upgrades in a home, most of which expired after December 2016 with the exception of two; solar electric and solar water heating tax credits are available through December 31, 2021.
2018 Changes: Tax credits will vary based on when the equipment was installed.
TAX BREAK #5: A Home Office
If you work from home, your office space and expenses can be deducted. Keep in mine, however, that there are strict rules on what constitutes a dedicated, fully deductible home office space.
2018 Changes: This deduction will be eliminated for employees who have an office to go to but work from home occasionally.
TAX BREAK #6: Home Improvements to Age in Place
Renovations such as wheelchair ramps or grab bars in slippery bathrooms are costly but these improvements might mean a nice tax break for homeowners planning to age in place. However, there are two caveats – you’ll need a letter from your doctor to prove any changes were medically necessary and the deduction will only kick in when the expenses for these renovations exceed 7.5% of your adjusted gross income.
2018 Changes: Nada.
TAX BREAK #7: Interest on a Home Equity Line of Credit
If you took out a HELOC in 2017 or earlier, the interest you pay on that loan is also deductible.
2018 Changes: The new tax law eliminates this deduction unless that HELOC is used specifically to “buy, build, or improve a property,” according to the IRS.
Get the full article here: https://www.realtor.com/advice/finance/tax-benefits-of-owning-a-home/