Potential Tax Benefits of Owning a Home
Once you become a homeowner, you realize there are a lot of expenses that come along with homeownership. Did you know some of those expenses might help lower your federal income taxes? It's true! Check out some of the potential tax savings you could score by owning a home!
Mortgage Interest: You can deduct the interest on loans of up to $750,000 or $1,000,0000, depending on when your mortgage went into effect. Note this is an itemized deduction.
Property Taxes: Another itemized deduction, you have the ability to deduct up to $10,000 of your property tax bill for a married couple filing jointly.
Private Mortgage Insurance (PMI): Chances are, if you put less than 20% down on your home, you are likely paying PMI or Private Mortgage Insurance. The cost ranges from 0.3% to 1.15% of your loan. This itemized deduction might help lower your tax bill!
Energy Efficient Upgrades: This is not an itemized deduction, this one comes in the form of a credit! Ending in 2021, this credit is available for solar electric and solar water heating equipment.
Home Office: If you are self-employed and work from home, you can deduct up to a max of 300 square feet of office space at $5/square foot. This amounts to $1,500!
Home Improvements for Aging in Place: While you will need a letter from your doctor to show these improvements were medically necessary, you can deduct expenses for making improvements such as adding grab bars, wheelchair ramps and modifications and more. To qualify, you need the letter from your doctor and you are able to deduct expenses that are over 7.5% of your adjusted gross income.
Interest on Home Equity Line of Credit: You are eligible to deduct the interest on your home equity line of credit, but only if the money is used for buying, building or improving a property.