Homeownership offers a variety of tax benefits that can lead to significant savings over time. Here are some of the key tax advantages associated with owning a home
Mortgage Interest Deduction:
Homeowners can deduct interest paid on up to $750,000 of mortgage debt ($375,000 if married filing separately) for loans taken out after December 15, 2017. Loans that were obtained before this date have a higher limit of $1 million ($500,000 if married filing separately). This deduction includes interest on your primary residence and possibly a second home.
Property Tax Deduction:
Property taxes paid on your primary residence, and potentially on a second home, can be deducted. The total deduction for state and local taxes, including property taxes (and either income taxes or sales taxes), is capped at $10,000 ($5,000 if married filing separately).
Home Office Deduction:
If you use part of your home for business purposes, you may be able to deduct expenses for the business use of your home, including a portion of your utility bills, home insurance, and home repairs. This deduction is available to both homeowners and renters, and the space must be used regularly and exclusively for business.
Points Deduction:
Points paid to obtain a home mortgage for the purchase or improvement of a primary residence are generally fully deductible in the year they are paid. If points are paid for refinancing, the deduction may be spread out over the life of the loan.
Home Improvement Loan Interest Deduction:
Interest on loans taken out for home improvements can also be deductible, provided the loan is secured by your primary residence and the improvements add substantial value to the home, prolong its life, or adapt it to new uses.
Energy Efficiency Credits:
Tax credits for residential energy efficiency have been extended. These credits are available for installations of energy-efficient windows, doors, roofing, insulation, and more. The specifics of the credit depend on the type and timing of the installation.
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