Do You Want to Save Money? Tax Breaks for Homeowners
Tax Breaks for Homeowners
You may not qualify for all of them, but don't you want to know for sure?
Source: Rental Realties
The Mortgage Interest Deduction
Most homeowners know they can deduct the interest they pay on their mortgages from their federal income taxes, but they may not be aware that because points (one percent of your loan's total value) are basically prepaid interest, they can also be deducted. The rules for the mortgage interest deduction have changed somewhat thanks to tax reform: The deduction is now capped at mortgage amounts of $750,000, though if you have an existing mortgage that's larger than that, you'll still be allowed to deduct the interest (the new limit applies to mortgages acquired after 2017).
The Property Tax Deduction
Property taxes are a local tax that can be deducted as part of the state and local taxes deduction. This can be a huge tax break if you live in an area with high property taxes. However, note that the state and local taxes deduction will now be capped at $10,000 starting in 2018. If you pay high state income taxes and/or have very high property taxes, you may not be able to squeeze the full expenses into this deduction in future years.
Medical Home Improvements Deduction
If you make changes to your home for medical reasons, you can deduct the costs as part of the medical expense deduction. This covers both big improvements (e.g., putting in an elevator if you can no longer climb stairs) and small ones (e.g., switching your doorknobs to lever-style knobs because arthritis makes it hard for you to grip things).
Note that you can only claim a deduction for these expenses to the extent that they don't increase the value of your home. For example, if your house was worth $200,000 and adding an elevator cost you $80,000 but increased your home's value to $250,000, then you could only deduct $30,000 of the expense (the $80,000 cost minus the $50,000 increase in the house's value). If the improvement doesn't change the value of your home, then you can deduct the entire amount. You can also deduct upkeep expenses for medical improvements in future years; for example, if you have a maintenance man check out your new elevator once a year, you can deduct his fees as a medical expense.
Although the recent tax reform bill dramatically increase the standard deductions for all filing statuses, if you can take all three of these deductions, you're far more likely to benefit from itemizing. And maxing out these deductions will also make other itemized deductions more attractive, including the charitable contribution deduction. When you throw those other itemized deductions into the pot, you may find that your total savings are significantly greater than your standard deduction.
ATTENTION FIRST-TIME HOMEBUYERS:
During Tax Season, Refunds Help So Many Become Homeowners!
Down payment is one of the biggest obstacles for prospective first time buyers to purchase a home. But during tax season, many tax payers have more funds than any other time of year. So there is no better time to qualify for a new home! Quite often a tax refund may actually cover the whole down payment on a home purchase. Additionally there are several programs that do not even require a down payment. Even though down payment may not be required, assets help the strength of the borrower. Furthermore, tax refunds may be used as assets or down payment right away.
Mortgage Products Available for First Time Buyers Offering Low to No Down Payment
- USDA- No down payment required
- VA- Usually no down payment required. Depends on entitlement amount, purchase price, and county limit
- FHA- 3.5% down payment
- Down Payment Assistance- Use to offset down payment or closing costs
- Conventional – 3% or more down payment
With a tax refund, is there a better time to buy? This is a great opportunity – low rates, stable job market, and affordable homes. Why not buy a home now? Contact Us today, become a homeowner in 30 days!