Mortgage Tax Breaks
By Jim Cleer, Mortgage Loan Officer
Thinking of buying a home, but not sure if renting may be a better option for you? There are upsides to both, but homeownership provides you with some incredible tax advantages. Check out these important tips and notes below:
- Mortgage interest is tax deductible. Most people know this, but may be unaware that with recent changes to the law, interest on the first $750,000 of the loan is tax deductible. The old limit was up to $1,000,000. Also, while home equity loans and lines of credit used to be tax deductible up to the value of the home, recent changes now provide tax deductibility on loans and lines if they were used to purchase, build or upgrade the home. Gone are the days of buying a car or funding college on a home equity line of credit and being able to write the interest off.
- Property taxes up to $10,000 are tax deductible. This figure can be found on your year-end mortgage statement if you escrow. If you don’t escrow you will need to contact your municipality for the documents.
- If you paid discount points on the loan when you closed, those can be deducted.
- If you’ve owned the home for five or more years and lived in it at least two of the last five years, you will not have to pay taxes on any gain from the sale of the property.
- 26% of the purchase price for solar energy upgrades can be deducted through 2020, but the figure drops to 22% in 2021 and is scheduled to end after that.
- Whether it’s a side hustle or a full-time work-from-home position, you can deduct your home office expenses and space that is used. The current tax law allows you to take a tax deduction of $5 per square foot, for up to 300 square feet of office space. You can get a maximum deduction of $1,500.
- If you plan to live in your home for a long time, you can deduct expenditures that assist you with aging. Some common examples are wheelchair ramps that you’d install to enter your home, or grip bars in a bathtub to avoid slipping.
As you can see, homeownership can provide you with some significant tax advantages, not only at the time of purchase, but throughout your time of ownership and even when you decide to sell. Still have questions? Contact our team!