As a homeowner, you know the joys and responsibilities that come with owning a home. From mowing the lawn to replacing a leaky roof, homeownership can be both rewarding and costly. But did you know that many of the expenses that come with homeownership can be used to lower your tax bill? That’s right, the IRS offers a range of tax deductions for homeowners that can help offset some of the costs of owning a home.
In this ultimate guide, we’ll go over the best tax deductions for homeowners and show you how to maximize your savings come tax season. Let’s get started!
Tax Deductions for Homeowners
- Mortgage Interest Deduction
The mortgage interest deduction is one of the most well-known tax benefits for homeowners. If you own a home and have a mortgage, you can deduct the interest you pay on your mortgage loan each year. This deduction can add up to substantial savings, especially in the early years of your mortgage when you’re paying mostly interest.
To claim this deduction, you’ll need to itemize your deductions on your tax return using Schedule A. Keep in mind that the mortgage interest deduction is capped at $750,000 for mortgages taken out after December 15th, 2017.
Form 1098 for tax deduction
Form 1098 is a tax form used to report mortgage interest payments made by a borrower to a lender. The form is used to claim the mortgage interest deduction, which allows taxpayers to deduct the amount of mortgage interest they paid during the tax year.
The lender is required to send Form 1098 to the borrower by January 31st of each year, and the borrower can use the information on the form to complete their tax return. The form shows the total amount of mortgage interest paid during the year, as well as any points paid and any mortgage insurance premiums.
It’s important to keep Form 1098 with your other tax records, as you’ll need it to claim the mortgage interest deduction. If you don’t receive Form 1098 from your lender, you should contact them to request one.
- Property Tax Deduction for homeowners
Another popular tax deduction for homeowners is the property tax deduction. This deduction allows you to deduct the amount you pay in property taxes each year from your taxable income. To claim this deduction, you’ll need to itemize your deductions on Schedule A.
- Energy-Efficient Home Improvements helps for tax deductions
If you’ve made energy-efficient improvements to your home, you may be eligible for a tax credit. The Nonbusiness Energy Property Credit allows you to claim a credit for 10% of the cost of certain energy-efficient upgrades, such as installing insulation, replacing windows, and adding energy-efficient heating and cooling systems.
- Home Office Deduction for homeowners
If you use part of your home as a home office, you may be able to deduct a portion of your home expenses, including mortgage interest, property taxes, and utilities. To claim this deduction, you’ll need to meet certain requirements, such as using the space exclusively for business purposes and regularly using it as your principal place of business.
- Capital Gains Exclusion for homeowners
When you sell your home, you may be able to exclude a portion of the capital gain from your taxable income. The amount you can exclude depends on various factors, such as your filing status and how long you lived in the home. In general, if you lived in the home for at least two of the five years before the sale, you can exclude up to $250,000 of the capital gain from your taxable income. If you’re married and file a joint return, the exclusion is up to $500,000.
“Are You Ready to Save on Your Taxes as a Homeowner?”
As a homeowner, you have access to a range of tax benefits that can help offset some of the costs of ownership. From mortgage interest to energy-efficient upgrades, there are many ways to lower your tax bill. By taking advantage of these deductions, you can maximize your savings come tax season. So, what are you waiting for? Start taking advantage of these tax benefits today!
In conclusion, the tax deductions for homeowners can be a valuable tool to help offset the costs of owning a home. By taking advantage of these deductions, you can lower your tax bill and keep more of your hard-earned money. Whether you’re a new homeowner or have owned your home for years, it’s never too late to start taking advantage of these tax deductions. Be sure to keep good records and consult a tax professional if you have any questions. With the right planning and preparation, you can make the most of these tax benefits and enjoy the many rewards of homeownership.