Tax benefits for homeowners that you should take advantage of
Owning a home not only represents a long-term investment, but it also offers tax advantages that can reduce your tax burden. Knowing these tax benefits for homeowners will allow you to take advantage of deductions and credits that can save you money when filing your tax return.
One of the most important homeowner tax benefits is the mortgage interest deduction. If you have a mortgage on your main home or a second property, you can deduct the interest paid during the year, which reduces your taxable income. This is especially helpful in the early years of the loan, when most of the monthly payment goes toward interest.
Another key benefit is the property tax deduction. Homeowners can subtract the state and local taxes they pay annually on their home from their tax return, easing the tax burden. However, it is important to be aware of the deduction limit set by the IRS for this category.
Energy efficiency improvements can also lead to tax savings. If you’ve made improvements to your home, such as installing solar panels, energy-efficient windows or green heating and cooling systems, you may qualify for tax credits designed to incentivize the use of clean energy.
If you work from home, you may be able to take advantage of the home office deduction. This benefit allows homeowners to deduct a percentage of their housing expenses, such as rent, utilities and internet, as long as the space is used exclusively for work activities.
When it comes time to sell your property, you may also benefit from the capital gains exclusion. If you have lived in the home for at least two of the past five years, you may be able to exclude up to $250,000 in gains (or $500,000 if filing jointly) from capital gains tax.
Maximizing homeowner tax benefits can make a big difference in your personal finances. To ensure you make the most of these opportunities, keeping good records of your expenses and consulting with a tax expert can be a big help.
