By Joey Ahern
5 Big Tax Breaks for Homeowners
There’s been a lot of buzz this year surrounding the new tax laws. If you found it confusing to keep up, don’t worry, we’ve broken it down for you so you can better understand how some of these tax breaks can benefit homeowners.
Owning a home is expensive. Aside from bills, there’s always something to fix, update, or maintain when owning a home. If you’re a home owner, you might qualify for some tax breaks that’ll help lessen the expenses when it comes to home ownership.
Some of the tax breaks we’ve mentioned are itemized. This means that you would forgo the standard deduction when doing your taxes. It’s smart to figure out first how much money these itemized deductions would save you and if it makes better sense to go with the standard deduction.
One of the biggest deductions is the interest paid on your mortgage. A 30-year mortgage on a $300,000 home at current rates will run you more than $12,000 in interest payments your first year. That’s a lot of money that’s not going to your principal. You can deduct the interest from your mortgage and from any other mortgage that you have. For example, if you own a second home. As long as you don’t use it as a rental property, you’re able to use your second home as part of your mortgage interest deduction.
Medical Home Improvement Deductions
If you need to make home improvements to your home due to any medical condition, you’re able to deduct the cost. For instance, if you needed to change the door knobs if you suffer from arthritis, you can deduct the cost.
It’s important to remember that larger home renovations for improvements may increase the value of your home. If you add in an elevator for someone with medical needs, this could increase the value of your home. You can still deduct part of the cost. You would subtract the amount of money your home value was increased from the total cost of the project. That’s the amount you’d be able to deduct.
When renting a home or apartment, the renter is unable to deduct the rent that they pay. However, a landlord must include the rent (income) they receive on their taxes. Homeowners can invest in themselves and live in a rent-free home. However, it’s often overlooked that homeowners are also their own landlords. The tax code treats homeowners the same as renters while ignoring their simultaneous role as their own landlords. The Office of Management and Budget estimates that the exclusion of imputed rent reduced federal revenue by nearly $79 billion in fiscal year 2015.
If a person relocates their residency due to a new job position that is 50 miles or more away from their previous home, they may qualify for a residential moving cost deduction. This might also apply if the new position allows you to work from home (at least 75% of the year).
If you suffered property loss this year and the insurance company didn’t reimburse you for the damage, you might be able to deduct the costs you had to spend out of pocket. Of course, this would not apply to something small. However, sometimes insurance companies do not cover flooding, water damage, or even vandalism. If an incident does occur with significant costs to you, make sure you document it all to take advantage of this tax break.
Homeowners Can Take Advantage of Tax Breaks
Owning a home does come with a sense of security. You don’t have to pay rent or report to any other landlord aside from yourself. However, it does come with some downsides. If the water heater breaks, it’s no longer the landlord’s responsibility to fix it. Taking advantage of some of the tax breaks that homeowners are entitled to, may help with some additional costs outside of everyday living.