Owning a home is one of the biggest investments most people make in their lifetime. Being aware of tax deductions and other credits available will give this big purchase every opportunity to pay you back a little come tax time. Here are six tips for homeowners to maximize your tax deduction:
Tip #1: Be Organized
Keep detailed records of your home-related expenses, financial documents and receipts. Most federal income tax deductions and credits require a paper trail, so the more organized your records are, the easier the process will be and the more likely it is that nothing will be missed or forgotten.
Tip #2: Deduct Your Mortgage Interest
If your mortgage is less than $750,000, you can deduct the interest you pay on the loan for no more than two residences. This could be your primary residence, summer home, or even a boat if it has plumbing or a bathroom. You can also include interest you may have paid when you closed on your home.
If you own more than two properties, be sure to use the deductions from the property that will give you the largest tax deduction — it may not necessarily be the property with the biggest mortgage payment.
Tip #3: Deduct Your Home Office Space
If you work from home in a dedicated space, you can deduct that space on your taxes. The current tax law allows you to deduct $5 for each square foot of office space, up to 300 square feet. This law has been taken advantage of by some, which is why it has earned a reputation of being an audit trigger. Make sure the space you deduct is exclusively used for your business or side hustle.
Tip #4: Deduct Your Property Taxes
With the Tax Cuts and Jobs Act of 2017, deducting your property taxes is still possible but not as flexible as it once was. You can now deduct up to $10,000, and that includes a combination of state and local tax deductions and state and local property tax deductions.
Tip #5: Consider Energy Efficient Upgrades
Tax incentives have changed for these types of upgrades, but some are worth looking into. Purchases for electric and water heating equipment, solar panels, rain barrels and drought tolerant landscaping may apply. Make sure to do your due diligence and triple check the specific requirements and deadlines for these green projects.
Tip #6: Age-In-Place Deductions
If you plan to live in your residence as you get older, you may be able to deduct expenditures for home improvement projects that will assist you as you age. Upgrades such as wheelchair ramps, lowering cabinets and electrical fixtures, and installing bathtub grab bars may qualify.
Now that your taxes are handled, you might be thinking about going ahead with that kitchen remodel or new addition to your home. Ed Currie is the number one construction loan expert in the country, and he and his team can help you explore different loans that work with your budget. Schedule a free consultation today by calling us at 847-214-2404. For more tips and our latest updates, check us out on Facebook, Twitter, LinkedIn or Pinterest!
