What Tax Benefits Do You Qualify for as a Homeowner?
You probably already know homeownership comes with a range of benefits: You can avoid the rising cost of rent, build equity and wealth, customize your living space with home improvement projects, and even increase your credit score. But did you know that being a homeowner could also save you thousands of dollars on your taxes?
Here’s how it works – When you own a home and have a mortgage, you typically become eligible for a variety of different tax benefits. Regardless of whether you have a Conventional or FHA Loan, whether this is your first home or your fifth, or whether you file your taxes jointly or separately, you could potentially qualify for multiple tax deductions and credits.
Interested in saving money next tax season and increasing your refund? Check out some of the standard deductions (which are claimed at the beginning of your return to reduce your total income and therefore reduce your taxes) and credits (which are more like “gift cards” received at the end of your return to directly lower the amount of tax money you owe) you may qualify for as a homeowner below.
Potential Tax Deductions
- Mortgage Points - If you paid your lender for mortgage points, you may be able to claim the money you spent on each point on your tax return.
- Mortgage Insurance - If your down payment was less than 20% and you’re currently paying Private Mortgage Insurance (PMI), you may be able to deduct all of the PMI payments you’ve made over the last year.
- Mortgage Interest - Regardless of the size or interest rate of your home loan, you can typically deduct all of your mortgage interest (up to a certain amount of indebtedness) when filing your taxes.
- Real Estate Tax - If you pay property taxes with your mortgage, you can typically deduct the full amount you pay each year when you itemize your tax return.
- Home Office - If you use a portion of your home exclusively for business, you may be able to deduct a portion of your office costs when you file your taxes.
Potential Tax Credits
- Mortgage Credit Certificate (MCC) - If you’re a first-time homebuyer who meets certain income requirements, you could receive a tax credit (up to $2,000 based on your mortgage amount and interest rate) at the end of your return.
- Residential Energy Credit - If you installed any type of geothermal, wind, fuel cell, biomass, or solar energy system to increase the efficiency of your home, you could receive a tax credit based on the date and cost of your installation.
Claiming every deduction and credit when you file your taxes might be time-consuming, but it’s definitely worth it! By utilizing these tax benefits, you have the potential to reduce your state and federal tax, save money over time, and make your home a more cost-effective investment… so what are you waiting for?
If you’re a current homeowner, we urge you to take advantage of every tax benefit you can. And if you have any additional questions about itemizing deductions, how to qualify for customized tax credits, or what counts as a deductible expense, we encourage you to meet with your tax advisor for extra help and guidance.
And if you’re not a current homeowner? Our advice is to put this year’s tax return toward a down payment and buy a home! Today’s rental market is getting worse and worse, so it’s the ideal time to reach out to a Loan Officer, apply for a loan, and profit from the many benefits of homeownership instead.
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