When filing taxes at the beginning of the year, owning a home can work in your favor. If you didn’t already know, there are specific tax deductions that homeowners are eligible for based on different factors. Have you ever asked the question, “What can I write off as a homeowner?” If so, continue reading to find out what types of tax deductions work best for you when you own your home. Using the right deductions can help you save money in the long run while drastically reducing what you owe to the IRS.
3 Need to Know Tax Deductions When Owning a Home
1. Home Equity Loan Interest
The home equity loan interest is tax-deductible under certain conditions. It’s one of the several incentives that homeowners get to enjoy. If you’re planning to complete renovations that need to be made to improve the overall condition of your home, consider using a home equity loan because the interest on the loan is tax-deductible.
2. The Mortgage Tax Credit
While this isn’t an option for everyone, it’s advantageous for low-income and middle-income individuals looking for a tax break. People often ask, “How much of a tax break is owning a home?” Although the amounts can vary per situation, the truth is that owning a home provides you with many opportunities to get more of a tax break. Often you will end up paying less into taxes than you would’ve before you were aware of these different credits and options available to you.
With the mortgage tax credit, you can deduct roughly 20 percent of the amount of mortgage interest you’ve paid throughout the past 12 months. Keep track of what you’ve spent to get a feel for how much you can deduct.
3. Household Expenses
Did you know that it’s not just about the mortgage when getting tax deductions for being a homeowner? It’s also about other things, such as your home expenses. You’re probably wondering what house expenses are tax-deductible in the first place. The Internal Revenue Service lists the expenses that qualify for a tax deduction.
For instance, did you have to complete repairs, pay for insurance, or take care of certain maintenance tasks? If you’ve spent money on any of these things, you can get a tax deduction. Do I need proof? YES! Of course, you need to have proof. You can’t just claim to have made repairs without doing them to get a tax break because it will increase your risk of an audit. So, save your receipts when paying for homeowners insurance, maintenance, and repairs. It’s always good to have the receipts saved in a folder within a filing cabinet that you can access with ease when you need to do so. It’s even better if you’re planning to have your taxes filed by a professional tax preparer because they can review the receipts and get you the highest deduction possible.
With tax deductions like these available to homeowners, be sure to include them and use them to get the biggest tax break possible. Don’t hesitate to consult with a financial advisor or tax preparer for additional tips on tax deductions that apply to your specific situation.