Tax Benefits You Need to Know

Tax season is here, and you might have already done them, if so hooray for you! I still have to do mine! FML. Anyways, you may already know there is a tax benefit owning a home, but you have no clue how much, or what it is exactly. That’s what I’m here for, to provide you all the juicy details.

Why is this important?

Well there has been a major change. Especially since the new Tax Cuts and Jobs Act–the most extraordinary improvement some might say in more than 30 years.

Benefit #1 Mortgage Interest

This is the main one everyone knows and it’s still a thing, but it’s had some work done. If you bought a home before December 15, 2017, you can still deduct interest on loans up to $1 million. Anything after that date the tax reform only allows homeowners to deduct interest on the first $750,000

Is the new tax change bad??

Well it’s still an immense benefit of owning a home to still be able to deduct interest. Some say the more recent your mortgage, the greater your tax savings.

By the way, be aware that mortgage interest deduction is an itemized deduction. For it to work, all of your itemized deductions need to be more than the new standard deductions, which the Tax Cuts and Jobs Act nearly doubled to $24,000 for a married couple (used to be $12,700). For individuals the deduction is $12,200, and it’s $18,350 for head of households.

This will probably cause less people to itemize than previous years because it may not be worth is this year. It might work in your favor if you’re a married couple who paid more than the $24,000 because then you can reduce your taxable income by an additional amount by itemizing.

Benefit #2 Property Taxes

Before you could deduct the entire amount of your property taxes but now, it’s capped at $10,000 for those married filing jointly no matter how high the taxes are.

Benefit #3 Private Mortgage Insurance

If you bought a house and put less than 20% down, chances are you’re paying private mortgage insurance, or PMI, which cost from 0.3% to 1.15% of your home loan. This benefit was about to expire, and it was expanded, that woohoo!!!

Benefit #4 Energy Efficiency Upgrades

There was nothing added or removed to this tax law so if you’re already familiar with it, you’re good. If not, this is basically a credit for being efficient and caring of the world. The Residential Energy Efficient Property Credit is a tax incentive for installing alternative energy upgrades in your home. This includes solar electric and solar water heating equipment.

Benefit #5 A home office

So, this one has changed a lot actually. In the past, all of your office space, and expenses could be deducted no questions ask but NOW you can only take $5-per-square-foot deduction for up to 300 square feet of office space, which totals to a maximum deduction of $1,500.

Benefit #6 Home improvements to age in place

This one didn’t change much. Basically, if you improve your old home with renovations like wheelchair ramps, or grab bars in slippery bathrooms, you can deduct those improvements. Goes as far as widening doorways, lowering cabinets or electrical fixtures, and adding stair lifts. BUT you’ll need a letter from your doctor to prove these changes were medically necessary.

Benefit #7 Interest on a home equity line of credit

These things were used for a variety of things like paying for a wedding, college education, or home improvements. And you could have legally deducted the interest. But good ol’ uncle Sam said enough is enough!

Now, the interest is only deductible if you specifically use it to buy or improve a property.

Ok, I think I covered a good amount. Hope it helped and made you think about all the benefits of owning a home. The benefit of renting is basically NONE!

As always thank you for reading, I appreciate you and your time

I am not a Tax professional, so you really should consult with someone before making any decisions.