Owning a home comes with many benefits—and many expenses. As a homeowner, you may be able to find relief from those expenses through home-related tax deductions and exemptions.
By understanding what you can claim on your tax return, you can potentially save a significant amount of money each year. We’ll cover the basics, but it’s important to consult your tax professional before making any decisions.
Deductions vs. Exemptions: What's the Difference?
Tax deductions reduce your taxable income, meaning you pay less in taxes. Exemptions, on the other hand, directly lower the amount of property taxes you owe.
Top deductions for homeowners
- Mortgage interest: This is one of the biggest deductions for homeowners. If you itemize your deductions, you can deduct the interest you pay on your mortgage up to certain limits. The limits depend on your filing status and the type of mortgage you have.
Keep a lookout for your Mortgage Interest Statement (Form 1098) from us! You can find it available immediately in your online account if you’ve opted to go paperless. Otherwise, it will be mailed to you.
- Property taxes: You may be allowed you to write off state and local taxes you paid on your property from your federal income taxes if you itemize your deductions. This includes items like your annual paid property taxes, the assessed value of your home, and closing costs if you purchased your home that year.
- Home office expenses: If you have a dedicated home office that you use regularly for work, you may be able to deduct a portion of your home expenses, such as mortgage interest, property taxes, utilities, and repairs.
- Home improvement costs: Certain home improvement costs, such as those related to energy efficiency or accessibility, may be deductible.
Exemptions to Lower Your Property Taxes
Some states offer property tax exemptions or reductions such as Senior Citizen, Disability, or Veteran. Another common exemption is the Homestead exemption, which reduces the taxable value of your home. These designations can result in lower property taxes.
Things to Remember
- The rules for deductions and exemptions can change, so it's important to consult with a tax professional to ensure you're claiming the right ones.
- You can find more information about tax deductions and exemptions on the IRS website: https://www.irs.gov/.
Bonus Tip: Keep good records of all your home-related expenses, receipts, and improvements. This will make it much easier to claim the deductions and exemptions you're entitled to.
Owning a home can be a rewarding experience, and understanding the tax breaks available to you can make it even more enjoyable. By claiming the deductions and exemptions you deserve, you can save money on your taxes and keep more of your hard-earned cash in your pocket.
Additional Resources:
- IRS Publication 530: https://www.irs.gov/pub/irs-pdf/p530.pdf
- National Association of Home Builders: https://www.nahb.org/
National Endowment for Financial Education: https://www.nefe.org/