If you own your home you might not be aware of some of the benefits that come along with it. Of course there is the increased satisfaction of home ownership. We know that we appreciate the benefits of owning our own space. We can paint the walls the colors that we like. Decorating choices are are our own. When we want to make improvements like new carpet or hardwood instead of carpet the choice is ours. There is also the benefit of appreciation that we get the benefit of when it is time to sell. But what are the tax benefits of owning vs. renting? This week we wanted to highlight the tax benefits of owning a home. Here are seven that you should remember come tax time!
Mortgage Interest Deduction
The number one benefit of owning is that you are able to deduct the mortgage interest at tax time. The more recent your mortgage the greater your tax savings. This deduction is itemized.
Tax Benefits of Owning a Home: Property Taxes
Another benefit is that you are able to deduct your property taxes. Taxes are built in to most people’s monthly mortgage payment so you may not even know how much you are paying in taxes. You will be receiving a statement at the end of the year that will tell you and this amount can be written off.
Did you know that your private mortgage insurance is also tax deductible? It is! If you were not able to put down 20% when you purchased your home you are paying PMI or private mortgage insurance. That amount can be tax deductible.
Tax Benefits of Owning a Home: Energy Efficiency
Have you made any energy efficient upgrades to your home? You can receive a tax credit for solar electric and solar water-heating equipment.
Work From Home
Many of us have had to work from home at points during the last several years. If working from home is a requirement for your job you may be able to deduct for a home office. That deduction can be as much as $5 per square foot up to 300 square feet or office space. If you are a W-2 employee, sorry you can not use this deduction.
Tax Benefits of Owning a Home: Home Improvements
Many of us are trying to decide if we are better off buying a place that fits our needs long term, as we age or if we are best staying where we are and making changes so that our current home works for us. Did you know that home improvements that are done to help you age in place may be tax deductible. The total cost must exceed 7.5 % of your adjusted gross income. You must also prove that the changes were medically necessary with a letter from your doctor.
Home Equity Line of Credit
Another deduction to consider is the interest on a home equity line of credit (HELOC). Interest is deductible only if used to buy, build or improve the property.
As a home owner these are the tax benefits of owning a home for you to think about now and remember when it is tax time. Make sure that you are prepared so that you are not missing anything that can save you money! If you are a renter and would like to enjoy some of these deductions for yourself. Contact us and let’s explore home ownership!