Why Homeowners Should Care About Tax Deductions
Maximizing Financial Benefits
Owning a home comes with significant tax advantages, many of which can reduce your taxable income and help you save money. By understanding and leveraging these deductions, homeowners can lower their tax burden and keep more money in their pockets.
Preparing Early for a Stress-Free Tax Season
Getting organized before the year ends can make tax season far less stressful. It ensures you don’t miss out on deductions and credits and helps you file your taxes with confidence. Proper preparation also gives you time to consult a tax professional, if needed.
Common Tax Deductions for Homeowners
Mortgage Interest Deduction
One of the most valuable deductions for homeowners is the mortgage interest deduction. Homeowners can deduct interest paid on mortgages for their primary or secondary residence. This deduction is especially beneficial during the early years of a mortgage when interest payments are highest. Check your Form 1098 from your lender for exact amounts.
Property Tax Deduction
Property taxes paid during the year may qualify for deductions, though there is a cap of $10,000 for state and local tax deductions (SALT) under current federal tax laws. Keep receipts or documentation from your local tax office to ensure you claim the correct amount.
Energy-Efficiency Improvements
If you’ve made energy-efficient upgrades to your home, such as installing solar panels, energy-efficient windows, or a new HVAC system, you may qualify for federal tax credits. The Energy Star program provides details on eligible improvements and potential savings.
Home Office Deduction
For those who work from home, a portion of your home expenses may be deductible. This includes a percentage of your utilities, rent, or mortgage if you’re self-employed or meet the IRS’s exclusive-use requirements for a home office.
Private Mortgage Insurance (PMI) Deduction
If you pay for private mortgage insurance (PMI), you might be able to deduct these payments, depending on your income level. This deduction can provide additional savings, especially for newer homeowners.
Lesser-Known Tax Breaks for Homeowners
Capital Gains Exclusions
When selling a primary residence, homeowners may exclude up to $250,000 (or $500,000 for married couples filing jointly) of profit from capital gains taxes if they meet specific ownership and use criteria. This is a major benefit for those planning to sell.
Medical Home Improvements
If you’ve made medically necessary modifications to your home, such as installing wheelchair ramps or widening doorways, you may qualify for deductions. These improvements must primarily benefit the homeowner or a dependent with medical needs.
Casualty Losses
If your home has suffered damage from a federally declared disaster, you might be eligible to claim casualty losses. Keep detailed records of the event, damage, and repair costs for accurate reporting.
How to Prepare for Tax Season
Gather All Necessary Documents
To claim deductions, you’ll need proper documentation. Gather your mortgage interest statements (Form 1098), property tax receipts, invoices for energy-efficient upgrades, and records of any other eligible expenses.
Track Home Improvement Costs
Keeping a record of major home improvements can benefit you at tax time and when selling your home. While most renovations aren’t immediately deductible, they may reduce your capital gains tax when you sell.
Consult a Tax Professional
A tax advisor can help ensure you’re claiming all applicable deductions while staying compliant with IRS rules. They can also help navigate complex scenarios, such as home office deductions or selling a property.
Frequently Asked Questions About Homeowner Tax Deductions
What Tax Breaks Are Still Available Under Current Tax Laws?
While some deductions have been limited under recent tax reforms, popular options like mortgage interest, property taxes (up to $10,000), and energy-efficiency credits remain available.
Can I Deduct Home Renovation Costs?
Renovations aimed at improving energy efficiency or addressing medical needs may qualify for deductions or credits. Other improvements may not be immediately deductible but can impact taxes when selling.
Checklist for Homeowners Preparing for Tax Season
- Organize mortgage interest statements (Form 1098)
- Gather property tax payment receipts
- Keep records of energy-efficient upgrades
- Track home improvement expenses for future use
- Consult a tax professional for personalized guidance
How Lockstep Realty Supports Homeowners
At Lockstep Realty, part of eXp Realty, we’re committed to helping homeowners maximize the financial benefits of homeownership. From connecting you with trusted tax professionals to advising on improvements that enhance your property’s value, we’re here to support you every step of the way. Our team understands that homeownership goes beyond the transaction—it’s about building value and security for the future.
Frequently Asked Questions (FAQs)
- What’s the most significant tax deduction for homeowners?
The mortgage interest deduction is one of the largest benefits for most homeowners. - Can I deduct my property taxes?
Yes, property taxes paid during the year may be deductible, but there are limits based on current tax laws. - Are energy-efficient upgrades tax-deductible?
Yes, many energy-efficient improvements qualify for federal tax credits. - What if I work from home? Can I deduct my home office?
Self-employed individuals or remote workers may qualify for a home office deduction if the space is used exclusively for work. - How can Lockstep Realty help with homeowner tax preparation?
We provide resources and connect homeowners with trusted professionals to ensure they maximize financial benefits.
