Bookkeeping, Accounting, Taxes, Settlement, CalculatorThere are plenty of benefits of owning your own home. You don't have to deal with difficult landlords. You're not paying someone else's mortgage and building your own equity. You can remodel and decorate to suit your lifestyle.

But owning a home can also be beneficial at tax time. Here are some of the bigger deductions homeowners can take: 

Mortgage Interest- If you own a home and your mortgage is less than $750,000 (or $375,000 if married and filing separately), you can deduct the interest you pay on the loan. If you purchased your home before December 31, 2017, you can deduct the interest on the first $1,000,000 of your mortgage ($500,000 if married and filing separately). This is one of the largest and most commonly known tax deduction for homeowners.  

Home Sales- Homeowners who have lived in their homes for at least two of the previous five years do not have to pay taxes on the profits of the sale of their home, up to $500,000 for married couples and $250,000 for singles. 

Property Taxes- You can deduct up to $10,000 in property taxes, but this is in combination with state and local income taxes or sales taxes.

Medically Necessary Home Improvements- You can include the cost of installing health care equipment or other medically necessary home improvements that benefit you, your spouse, or a dependent, but permanent improvements that increase your home’s value are only partly deductible. Remember that some of the more common improvements to make a home more accessible, like installing railings or ramps or widening doorways, typically don’t increase the value of a home and can be fully deducted.

Tax incentives for energy-efficient upgrades- You can claim tax deductions on solar energy (for electricity and for water heating equipment) through 2021. Based on when the equipment was installed, there is only a percentage of equipment cost you can deduct. 

Home Office Expenses- If you are self-employed and use part of your home regularly and exclusively for your business, you may deduct your home office expenses. The IRS even has a calculator to determine what square footage you can deduct. 

These deductions only make sense if you will be itemizing deductions and not taking the standard deduction for the 2019 tax year, which is:

  • $24,400 for married couples filing jointly
  • $12,200 for single and married individuals filing separately
  • and $18,350 for unmarried heads of households 

If you are unsure about your tax situation, what may and may not be deducted, please work with a tax professional. 

Posted by Jeff Sallan on
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