Homeownership comes with numerous financial benefits, including several tax breaks that can help you save money. Understanding the tax breaks available for homeowners can help you maximize your savings and reduce your taxable income. Here are eight tax breaks that homeowners should consider:
- Mortgage Interest: You can deduct the interest you pay on your mortgage from your taxable income. The limit for the deduction is $750,000 for a single filer or a married couple filing jointly, and $375,000 for married couples filing separately.
- Home Equity Loan Interest: You can also deduct the interest on home equity loans and lines of credit if the funds are used for home improvements. Prior to the Tax Cuts and Jobs Act, the interest was deductible regardless of how the funds were used.
- Discount Points: If you purchase discount points to lower the interest rate on your mortgage, you can deduct the cost of those points. However, loan origination points are not tax deductible.
- Property Taxes: Homeowners can deduct up to $10,000 in property taxes as a married couple filing jointly or $5,000 if filing single or married filing separately.
- Necessary Home Improvements: Permanent home improvements made for medical reasons can be tax deductible, such as installing medical equipment, railings, or widening doorways.
- Home Office Expenses: If you use a home office for regular and exclusive business use, you may be able to deduct expenses related to maintaining that space.
- Mortgage Insurance: Private mortgage insurance (PMI) payments can be deducted on itemized tax returns.
- Capital Gains: When you sell your home for a profit, you can keep up to $500,000 in capital gains as a married couple filing jointly, or up to $250,000 each as a single filer or married couple filing separately, if you lived in the house for at least two of the last five years.
Being aware of these tax breaks can help you save money and maximize your benefits as a homeowner. Consult with a tax professional or financial advisor to understand how these tax breaks apply to your individual situation.
I hope this information has been helpful. If you have an questions please reach out. My goal is to connect you with a lender to help you find a mortgage that will work for you, and not the other way around. Let me help you make that connect!