Tress Realty Group
  • Home
  • Investors
  • Homeowners
    • Selling >
      • Sale Prices
    • Buying >
      • Land
      • New Jersey 55+
  • News
  • About
  • Contact
  • Send Out Cards

Tax Benefits of Owning a Home: Do You Know Them All?

2/22/2017

0 Comments

 
Picture
The joys of homeownership are many: Your own house is a place to make sweet memories, build a financial nest egg, and whittle down your tax bill. Wait, what? Yep, it’s true: Your home can save you a bundle on April 15.

We’ve rounded up every last way to take advantage of the tax benefits of owning a home. Read on for the full rundown just to make sure you aren’t missing any, then pat yourself on the back for all the moolah you’ll save!
Tax write-off No. 1: Your mortgage interest
This is the biggie tax benefit of owning a home: the ability to deduct the mortgage interest you pay over the course of a year. And the more recent your mortgage, the greater your tax savings.

“The way mortgage payments are amortized, the first payments are almost all interest—so that’s why the mortgage interest deduction is worth the most in the first few years of the loan,” says Wendy Connick, owner of Connick Financial Solutions. (See how your loan amortizes and how much you’re paying in interest with this mortgage calculator.)
​
Here’s how this deduction looks for a married couple in the 28% tax bracket (that means a joint annual income between $151,201 and $230,450) who bought a home with a $300,000, 30-year mortgage at a 4% interest rate. They will pay $11,904 in mortgage interest their first year. Once you add in the other itemized federal deductions below, these homeowners can expect to save at least $3,333 in taxes during their initial year of ownership.

Tax write-off No. 2: Your property taxes
Generally, your property taxes are deductible on your tax return, says Brian Ashcraft, director of compliance at Liberty Tax Service. And that could be a hefty savings. According to the U.S. Census Bureau, the average household property tax is $2,127. If you have a mortgage, your taxes are built into your monthly payment.

You can also pay property taxes early and write off the entire expense if you’re staring down a large tax bill for any given year. Just note that you must claim the deduction in the year you wrote the check. For example, if you paid your 2017 property tax in 2016, claim that tax benefit on your 2016 return. Here’s more info on how to calculate property taxes.

​Tax write-off No. 3: Private mortgage insurance

If you put less than 20% down on your home, odds are you’re paying private mortgage insurance, or PMI, which costs from 0.3% to 1.15% of your home loan. But Uncle Sam’s willing to give you a tax break here by allowing you to deduct this amount from your income, too.

How much you’ll save: If you make $100,000 and put down 5% on a $200,000 house, you’ll pay about $1,500 in annual PMI premiums and thus cut taxable income by $1,500.

Note: The deduction is due to expire this year, says Connick. “Unless Congress renews it, the deduction will not be available for the 2017 tax year.”

Tax write-off No. 4: Energy-efficiency upgrades

Don’t miss out on tax credits for any “green” updates you’ve done to your home in the past year, says Michael Banks, founder of FortunateInvestor.com. The Renewable Energy Efficiency Property Credit allows you to claim a credit for up to 30% of the cost of equipment you purchased that uses renewable energy sources (e.g., solar panels and wind turbines).

Other home upgrades like new HVAC systems, energy-efficient windows, and storm doors can also earn a tax credit of up to $500. For example, if you installed central air conditioning, you can claim a $300 credit. This credit for residential energy-efficiency improvements expired at the end of 2016, so hopefully you made these improvements last year. If not, there’s still time for solar panels, since this credit runs through 2019.

Tax write-off No. 5: A home office

If you work from home, your office space and expenses can be deducted from your income, too. According to Vincenzo Villamena, managing partner of Online Taxman, you can 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. Understand, however, that there are strict rules on what constitutes a dedicated, fully deductible home office space. Your accountant can lead you through it.

Tax write-off No. 6: Home improvements to age in place

Many older homeowners plan to stay put and age in place—and if that entails renovations such as wheelchair ramps or grab bars in slippery bathrooms, the cost of these improvements for you, a spouse, or dependent results in a nice tax break, says Jayson Mullin, owner of Top Tax Defenders.

“You can deduct the amount by which the cost of the improvements exceeds the increase in your home’s value,” says Mullin. To break that down, let’s say the cost of installing a ramp totals $10,000 and increases your home’s value by $7,000. Then the allowable deduction would equal $3,000.

Just remember, these “aging in place” deductions must cost more than 10% of your adjusted gross income. So if your AGI is $60,000, there’s no deduction for the first $6,000 of medical home improvement expenses. But if you’re 65 and older, the expense must exceed only 7.5% of your AGI.

Tax write-off No. 7: Interest on a home equity line of credit

If you’ve tapped into your home equity by taking out a home equity line of credit, or HELOC, the interest you pay on the loan is also deductible provided you use this money to pay for home improvements or repairs.

How much you’ll save depends on the amount borrowed, but let’s crunch some sample numbers: If you take out a four-year $20,000 HELOC at 4%, you’ll have an $800 deductible that will save you about $205 in the first year of your loan. Use this calculator to see how much you’ll save.
Source: realtor.com
0 Comments



Leave a Reply.


    Picture

    Tress Realty

    Tress Realty Group compiles some of the best real estate news, tips, and information for buyers, sellers and investors.

    Get started with your home search at www.TressHomes.com.

    Archives

    April 2020
    January 2019
    October 2018
    July 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    June 2013

    Categories

    All
    Chatham
    East-brunswick
    Fair Haven
    Glen Ridge
    Hoboken
    Home Sales
    Maplewood
    Millburn
    Montclair
    Ridgewood
    South Orange
    Summit
    Tress Homes

    RSS Feed

Home

Website disclaimer and copyright

​
Use of the information and data contained within this site or these pages is at your sole risk. If you rely on the information on this site you are responsible for ensuring by independent verification its accuracy, currency or completeness.  It is provided “as is” without express or implied warranty. 

Some properties which appear on this web-site may no longer be available because they are under contract, have been sold or are no longer being offered for sale.  Images uses for navigation may be for properties in different towns, and are not intended to be considered anything other than representative of the types of houses that may be found in a particular municipality.  All data and/or search facilities on this site are for consumer's personal, non-commercial use and may not be used for any purpose other than to identify prospective properties that consumers may be interested in purchasing.

Tress Realty Group cannot guarantee the accuracy of the IDX/MLS data created by outside parties. Tress Realty Group further assumes no responsibility for any misleading content or incorrectly listed information due to such negligence. All ancillary information presented on this web-site is not guaranteed and should be independently verified by the users of this site. Tress Realty Group makes no warranty, either expressed or implied, as to the accuracy of the data contained within or obtained from this web-site.

Tress Realty Group accepts no liability for any interference with or damage to a user’s computer, software or data occurring in connection with or relating to this Site or its use or any website linked to this site.  Further, Tress Realty Group has provided Hypertext links to a number of sites as a service only. This should NOT be taken as implying any link between us and those various organizations or individuals.

Disclaimer: this website may be supported by ads and participation in affiliate programs. We may earn a commission when you click our links. The information included in this post is for informational purposes only and should not be taken as legal or financial advice.

Site copyrighted by Tress Realty Group LLC  © 2016-2022, all rights reserved.
  • Home
  • Investors
  • Homeowners
    • Selling >
      • Sale Prices
    • Buying >
      • Land
      • New Jersey 55+
  • News
  • About
  • Contact
  • Send Out Cards