If this is your first year filing taxes as a homeowner, you may find the process a little more time-consuming than when you were a renter. The good news is, the IRS offers many tax breaks that can help offset the cost of owning a home! Here are some of the most common tax deductions for homeowners.
Mortgage Interest Deduction: If you have a mortgage on your home, the mortgage interest deduction might allow you to reduce your taxable income by the amount of interest you paid on your home during the year. There are limits on the deduction, depending on how much you borrowed and when you purchased your home, so be sure to confirm with a tax professional.
Property Tax Deduction: The property tax deduction allows you to deduct the state and local taxes you’ve paid on your property from your federal income taxes. You may reduce your taxable income by up to $10,000 ($5,000 if single or married filing separately).
Home Office Expenses: If you operate a business out of your home, you may be eligible to deduct some of the expenses that come with maintaining your home office. The IRS requires that your home office be used for regular and exclusive business practices in order to qualify for this deduction. If you only use the office space occasionally or you are working from home for another employer, your home office will not qualify.
Renewable Energy Tax Credit: If you upgraded your home with renewable energy features, such as solar energy systems, geothermal heat pumps or small wind turbines, you may be eligible to claim a tax credit on the cost of buying and installing these features.
What’s Not Deductible
- Homeowner’s insurance
- Extra principal payments you made on your mortgage
- Title insurance
- Down-payments
If you are a homeowner, take some time to explore your tax deductions to make sure you’re maximizing the value of your home! If you need help tackling the details of your situation, it’s recommended to speak to a tax professional to ensure that you are cashing in on all the tax deductions available to you.
