6 Tax Benefits to Owning a Home
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Tax season is upon us! The due date to file is April 15, 2024 for your 2023 taxes. Let’s take a look at this realtor.com article that breaks down all the tax breaks homeowners should be aware of when they file their taxes this year.
Tax Break #1 – Mortgage Interest. Homeowners with a mortgage that went into effect before Dec. 15, 2017, can deduct interest on loans up to $1 million. If your mortgage debt occurred after Dec. 15, 2017, you can deduct the interest on the first $750,000.
Tax Break #2 – Property Taxes. This deduction is capped at $10,000 for those married filing jointly no matter how high the taxes are.
Tax Break #3 – Energy Efficiency Upgrades. Qualifying solar electric panels and solar water heaters are good for a credit of up to 30% of the cost of the equipment and installation. You can also get credits for energy-efficient home improvement lifetime credit of a $500 for improvements made to your home through December 31, 2022. Energy-efficient upgrades include things like exterior windows, doors and skylights, insulation, etc.
Tax Break #4 – Home Office. You can deduct $5 per square foot, up to 300 square feet, of office space, which amounts to a maximum deduction of $1,500. Important Note: Unfortunately, if you are a W-2 employee, you’re not eligible for the home office deduction under the CARES Act, even if you spent most of 2022 in your home office.
Tax Break #5 – Home Improvements to Age at Home. To get this break, these home improvements will need to exceed 7.5% of your adjusted gross income. You’ll also need a letter from your doctor to prove these changes were medically necessary.
Tax Break #6 – Home Equity Line of Credit Interest. If you have a home equity line of credit, or HELOC, the interest you pay on that loan is deductible only if that loan is used specifically to “buy, build, or improve a property,” according to the IRS. You can deduct only up to the $750,000 cap, and this is for the amount you pay in interest on your HELOC and mortgage combined. (And if you took out a HELOC before the new 2018 tax plan for anything besides improvements to your home, you cannot legally deduct the interest.)