A Guide to Tax Benefits for Homeowners
There are many great benefits of homeownership! It’s soon to be tax season so take full advantage of the tax breaks you can claim as a homeowner. To make it easier, we’ve compiled a guide to tax benefits for homeowners below!
Mortgage Interest
Homeowners with a mortgage that went into effect before December 15, 2017 can deduct interest on loans up to $1 million. The ability to deduct the interest on a mortgage continues to be a significant benefit of owning a home. The more recent your mortgage, the greater your tax savings.
Property Taxes
Property tax deductions are listed on the mortgage interest tax document that your mortgage company sends at the end of the year. This deduction is capped at $10,000 (no matter how high the taxes are) for those married and filing jointly.
Private Mortgage Insurance
If you put less than 20% down on your home, odds are you’re paying private mortgage insurance, which costs up to 1.15% of your home loan. You can deduct the interest on this insurance thanks to the Mortgage Insurance Tax Deduction Act of 2021, which reinstated certain deductions and credits for homeowners that were set to expire in 2020.
Energy Efficient Upgrades
The Residential Energy Efficient Property Credit offers two credits for solar electric and solar water-heating equipment installed between now and December 31, 2023. The SECURE Act also retroactively reinstated a $500 deduction for certain qualified energy-efficient upgrades such as exterior windows, doors, and insulation.
Home Office
You can deduct $5 per square foot, (up to 300 square feet) of office space, which amounts to a maximum of $1,500. Unfortunately, if you are a W-2 employee, you’re not eligible for the home office deduction under the CARES Act (even if you spent most of 2021 in your home office due to COVID-19).
Interest on a HELOC
If you have a Home Equity Line of Credit (HELOC), the interest you pay on that loan is deductible only if that loan is used specifically to buy, build, or improve a property. You can deduct up to the $750,000 for the amount you pay in interest on your HELOC and mortgage combined.
There’s more benefits to homeownership than tax cuts. Contact your ARC agent to more about the advantages of buying!
