Seven Tax Break Benefits for homeowners
Updated: Apr 7, 2019
Deadline to file your taxes is just around the corner! Have you done yours yet? Here are seven tax break benefits if you are a homeowner
Tax break 1: Mortgage interest One of the most lucrative tax breaks for homeowners is the deduction for mortgage interest. The new tax code didn't eliminate the deduction, but it did change substantially. The new tax bill allows homeowners with a mortgage that went into effect before Dec. 15, 2017, to continue to deduct interest on loans up to $1 million. However, for acquisition debt incurred after Dec. 15, 2017, the tax reform only allows the homeowner to deduct the interest on the first $750,000," says Lee Reams Sr., chief content officer of TaxBuzz. Tax break 2: Property taxes In the past, the entire property taxes had always been deductible. But now, this deduction is capped at $10,000 for those married filing jointly no matter how high the taxes are. Tax break 3: Private mortgage insurance (PMI) If you put less than 20% down on your home, chances are you're paying private mortgage insurance, or PMI, which costs from 0.3% to 1.15% of your home loan. The new tax bill extended the ability to deduct the interest on this insurance. Tax break 4: Energy efficiency upgrades The Residential Energy Efficient Property Credit was a tax incentive for installing alternative energy upgrades in a home. Most of these tax credits expired after December 2016; however, two credits are still around. The credits for solar electric and solar water heating equipment are available through Dec. 31, 2021 Tax break 5: A home office Prior to 2017, if you worked from home at all, your office space and expenses could be deducted. Now this deduction is gone completely for employees who have an office to go to but work from home occasionally. However, self-employed people whose home office is the main place they work, you can still take a $5-per-square-foot deduction for up to 300 square feet of office space, which amounts to a maximum deduction of $1,500. Note that there are strict rules on what constitutes a dedicated, fully deductible home office space. Tax break 6: Home improvements to age in place Home improvements will need to exceed 7.5% of your adjusted gross income. So if you make $60,000, this deduction kicks in only on money spent over $4,500. Tax break 7: Interest on a home equity line of credit If you have a home equity line of credit, or HELOC, the interest you pay on that loan is deductible only if that loan is used specifically to "buy, build, or improve a property," according to the IRS.