Buying a home is a huge undertaking and a big responsibility but, it also has several considerable financial benefits. One of the obvious benefits is that you are paying money into an actual investment, instead of paying rent to your landlords. Beyond this basic financial benefit, there are several advantages, particularly when it comes to tax season.
Here are the Top 6 Tax Benefits of homeowners:
The property tax deduction
Wherever you buy your home, you can expect to pay some property taxes. It is usually based off of the assessed value of the house. Property taxes are an expense that every homeowner needs to prepare for. One good thing that comes from paying those taxes, though, is that you can include state and local property taxes as itemized deductions. The amount of the deduction depends on when you pay the tax and not when it is due. Thus, paying property taxes earlier could have a positive impact on your return.
Mortgage interest deduction
If you have approved loan to buy a house, you can deduct the interest you pay on a mortgage, with a balance of up to $1 million. To have a deduction, you will have to itemize rather than take the standard deduction. For instance, if you’re in the 35% tax bracket and deduct $10,000 of mortgage interest, you can save $3,500.
If you work from home and have a dedicated space to do all your office work. Your office space and expenses can be deducted from your income. The home office doesn’t have to be an entire room to be called an office, a dedicated space will suffice.
Home improvements and renovations to age in place
Homeowners, as they grow old, plan to stay put and age in their own home. If renovations such as wheelchair ramps or grab bars in bathrooms take place, the cost of these improvements results in a nice tax break. The “aging in place” deductions must cost more than 10% of your adjusted gross income.
Renting out your home occasionally
If you rented out your home for parties and events like Social gatherings, reunions and the like, the income on the rental could be totally tax free as long as it was for only 14 days or fewer throughout the course of a year.
Energy-efficiency tax credit
If you’ve installed equipment that uses renewable sources of energy, such as the sun and wind, to help power your home, you may be eligible for the Renewable Energy Efficiency Property Credit. You can take advantage of an energy-efficiency tax credit of 10% of the amount paid (up to $500).