When buying a new home you may think of it as spending a large amount of money, albeit on a beautiful house but you don’t really expect to get money back. However, did you know you can get tax breaks when becoming a homeowner?
#1: Mortgage Interest
According to realtor.com you have the “ability to deduct the mortgage interest you pay over the year.” This is especially great for new homeowners because the first year is mostly interest. See your CPA for a true amount of what you would get back!
#2: Property Taxes
If you have the opportunity to pay them early and separately from your mortgage then you will be eligible for a discount. It may seem like a hassle to make two different payments but in the long run this will help!
In many states there is also the homestead exemption. In Florida this allows homeowners a $25,000 off of their property’s assessed value. You can qualify for even further exemption if you are over 65 or disabled.
This led to the Save Our Homes Amendment in which taxes would not go up more than 3% a year. This could also provide you with a portable taxable basis.
#3: Going Green Upgrades
Upgrading your home will always cost money but if you make “green” choices then you may be eligible for a tax break. Right now solar panels and wind energy generation among others can receive a tax credit. Make sure you have all your research done before you go to replace anything.
#4: A Home Office
In this day and age more and more people are working from home. The IRS allows you to write off certain expenses but make sure that this home office is dedicated to business and remember to itemize!
#5: Medical Home Improvements
If you need a wheel chair ramp or handicap accessible shower then this can qualify you for a tax break. Realtor.com referred to Jayson Mullins of Top Tax Defenders, who says “You can deduct the amount by which the home improvements exceeds the increase in your home’s value.” These improvements must exceed more than 10% of your adjusted gross income. If you are over 65 then they must just exceed 7.5%.
The most important thing to remember is to keep all receipts!
And if you are selling?
In 1997 the law on taxing the sale of your home was changed. Up to $250,000 or $500,00o for married (filed-jointly) in sales profit is tax free as long as the homeowner lived in it for 2 years.
If you have questions then speak with your CPA. They will be able to let you know what will work best for your situation!
Tata from the Ladies in Red!