Did you realize that nearly 2 in 3 Americans (64.1%) are homeowners?
Even more impressive, 37% of all homeowners are free and clear, meaning they’ve completely paid off their mortgage.
Why are so many people jumping on the homeownership bandwagon?
One major reason is the terrific tax benefits of owning a home.
Whether you’re about to buy your first home or you’ve owned yours for a while, it’s good to be familiar with home tax deductions.
In this post, we’ll briefly discuss 5 major tax advantages of owning a home.
Read on to ensure you don’t miss any on your next tax return.
1. Mortgage Interest
The first and most obvious tax advantage comes from your mortgage payment.
On an itemized tax return, you can reduce your taxable income by deducting the interest you pay on your mortgage.
If your home loan was issued before December 14, 2017, you can deduct the interest you pay on up to a $1 million loan. If you bought your house after that, the limit is $750,000.
2. Property Taxes
Another great tax break for homeowners is your ability to deduct state and local property taxes.
As of 2018, this amount was capped at $10,000 per year. For the majority of homeowners, this still represents a significant way to save money when filing.
The $10,000 can include property tax and state income tax, as well as any state or local sales tax.
Another important note: The $10,000 limit applies whether you’re single or married.
3. Home Office Expenses
Are you among the 8 million Americans who work from home?
If so, you may have a hidden tax advantage sitting right in your home office.
As long as you use the space solely for an office (not a guest room or other dual-purpose), you can deduct the expenses when you file your tax return.
You likely paid a lot of fees, or “points,” to your mortgage lender when you first purchased your home.
1% of the loan principal is equal to 1 point, and most home loans will include 1-3 points. Depending on the amount you financed, this could equal thousands of dollars.
The good news is that you can fully deduct that amount associated with obtaining your mortgage loan.
5. Rental Property Income
Are you in a position to rent out the property you own?
All you need is a tenant with good credit and a weekly pay stub and you’re officially a landlord.
Whether you rent your property long-term or as a vacation rental, you need to report that additional income on your tax return.
Why is this a tax advantage? Because you’re also allowed to deduct the cost of any improvements and repairs you make on your rental property.
Tax Advantages for Home Owners: Final Thoughts
As you can see, there’s no shortage of great tax advantages for owning a house.
From property tax deductions to the homeowner tax credit, you can save a lot of money on your next tax return.
So before your next visit to your accountant, review the items mentioned above to see which ones you qualify for.
Did you find this article helpful? Be sure to check out our other recent posts for more great home advice.