Can Homeownership Lower Your Taxes? Here Are 6 Expert Tips To Help You
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Here are some of the ones experts recommended looking into before homeowners file their taxes.
Greg Clement, CEO and founder of Freedomology, an app designed to help people achieve financial freedom, pointed out that the mortgage interest deduction is probably the most popular way homeowners benefit when it comes to taxes.
With it, homeowners can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of debt.
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Clement highlighted property taxes as another expense that can be written off.
Just keep in mind that the deduction for state and local taxes, including real estate taxes, is limited to $10,000. For married couples filing separately, the limit is $5,000.
For those who work from home, Clement pointed out that there is a deduction for home offices for the right type of employee.
'If you work from home you might qualify for a home office deduction if you are self-employed. W-2 employees are out of luck,' he said.
For those who have the means, Clement recommended renting out part of a home or the entire place to be eligible for certain tax benefits.
'If you're renting out part of your home, like an Airbnb or a basement apartment, you can deduct a percentage of your utilities and maintenance. That's free money most people never take advantage of,' he said.
'Some states offer property tax exemptions for seniors, so it's always worth looking into,' Clement said.
This usually applies to homeowners 65 and older, though some states give tax breaks to those as young as 61. In states like New Hampshire, seniors benefit from increased tax exemption as they get older, according to The Mortgage Reports.
However, some of these exemptions might not be available if a senior's income is more than a certain amount.
Those who make sustainable changes to their homes may be eligible for energy-efficient property credits.
'If taxpayers are in a position to put solar panels on their home or make other energy-efficient improvements, then that can be a great method of reducing your energy bills and claiming a significant tax credit,' said Adam Brewer, an attorney at AB Tax Law.
Overall, there are many tax deductions homeowners may be able to qualify for. Clement cautioned that not everything is tax deductible, but it's still important to keep track of upgrade costs.
'Some homeowners think everything they spend on their home is deductible, but that's far from the truth. You can't deduct a new hot tub or the pool you just put in, no matter how nice they are. However, if you're making major upgrades, keep track of them anyway. They could lower your capital gains tax bill when you sell the house,' he said.
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This article originally appeared on GOBankingRates.com: Can Homeownership Lower Your Taxes? Here Are 6 Expert Tips To Help You
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