6 Tax Breaks Homeowners Can Take Advantageby Rose Mary Real Estate Blog Writer
Some of the tax advantages for homeowners have vanished under the Tax Cuts and Jobs Act, which came into force in 2018. But the remaining tax breaks for homeowners are definitely nothing to sneeze at and can add up to large savings. In all the tax shake-up, the excellent news is that fewer individuals will have to figure out their tax forms. For homeowners, it pays to be aware of the available deductions. So let’s examine 6 tax breaks homeowners can take advantage.
1. Mortgage Interest
One of the most significant tax breaks for homeowners. One involving mortgage interest. In reality, you can deduct your mortgage interest on your income, which can be quite a heavy deduction. Additionally, interest on a refinanced mortgage can be deducted, so it is not restricted to that first mortgage.
However, these deductions have some fresh boundaries. Your full annual interest "is deductible on your income up to $750,000 [ which was previously $1,000,000 ] for any loans issued after" December 14, 2017, according to one reputable national newspaper. "The restrictions count as your complete debt related to housing, including your home mortgage, a second home mortgage or home equity loan or credit line."
2. Property Tax
The property tax deduction was one of the major tax breaks homeowners can take benefit, and while it still exists, some important changes have occurred. According to tax specialists, the current cap on estate tax deductions and other local and state taxes is $10,000, which is applicable to both "single and married taxpayers and is not indexed for inflation." Still, homeowners are allowed to deduct up to $10,000 for property tax, as well as for state income tax and state and local sales tax.
3. Home Equity Loan Interest
The deduction for home equity loans is another tax break that homeowners can take benefit. Sometimes for an emergency or a big buy you need money. And a home equity loan offers a way to get those funds if you have equity in your home.
You could deduct interest on home equity loans up to $100,000 before 2018, even if the money was used to pay off, say, credit card debt or college tuition payments. But now, as one financial source puts it, only "the interest you pay on a home equity loan used to buy, construct, or upgrade your home or second home stays." In addition, such loans “must be secured by your main home or second home.”
4. Deduction for Points
One of the often overlooked tax breaks, homeowners can take benefit of is the point deduction. Points are one of the charges charged by lenders, one point being equivalent to 1 percent of the principal of the loan. For most home mortgages, about one to three points are quite typical, and that can add up to a substantial quantity of cash.The good news is that you can deduct these points that are tied to your home loan.
Also, the points for the refinanced mortgage are deductible if you refinance. However, these points can only be deducted throughout the life of the loan – you can not take a big one-shot deduction.
5. Mortgage Tax Credit
Now here's one of the homeowners tax breaks that can take advantage, that many people don't know about. And while it only applies to specific situations, for some homeowners it can be a decent tax break.
This unique tax break includes a home buying program called Mortgage Credit Certificate (MCC) for low-income, first-time buyers. If you are a reputable legal source claim in this program, you can benefit from a mortgage tax credit of up to 20 percent of the mortgage interest payments made on a home. The peak loan is $2,000 annually if the loan levels of the certificate exceed 20 percent. you will need to “apply to your state or local government for an actual certificate.” But the credit remains available as long as you keep the loan and live in the home purchased with the certificate.
6. Deduction for Home Office
The deduction from home offices can be an significant tax break for freelancers and other self-employed individuals working from home. You may be able to deduct costs associated with that part of your home if you use a room or a portion of your home exclusively for business purposes. These expenses include the proportion of the bill for heating / cooling, insurance, depreciation, and repair. Keep in mind, though, that the space you claim in your home for a home-office deduction must be your principal place of business.
So homeowners can take advantage of the after-2018 tax breaks still important. And the upshot is that owning your own home is not just a nice investment, but can also save your cash when all these deductions are factored into. Still, in order to maximize tax breaks, you have to buy a house wisely.
Created on Aug 8th 2019 01:52. Viewed 153 times.