Ahh... the dreaded Tax Season. As a homeowner, the tax season can be something to look forward to! There are many tax benefits to take advantage of. We've compiled a list of the top tax benefits, both federal and state.
For most homeowners, this is usually the biggest deduction. A portion of every mortgage payment you make goes toward interest on the loan. The interest paid can be deducted, up to a limit. The loan must be for your primary residence or second home that was used to buy, build, or substantially improve your home. If the loan is not a secured debt on your home, it is considered a personal loan and therefore is not deductible.
How much can I deduct? It all depends on when you took out the mortgage.
Years prior to 2018: The maximum amount of debt eligible for the deduction was $1 million.
Beginning in 2018: The maximum amount of debt is limited to $750,000.
For tax years prior to 2018, the interest paid up to $100,000 of home equity debt was also deductible.
These loans include:
- Mortgage to buy your home
- A second mortgage
- A line of credit
- A home equity loan
You may be able to deduct discount points paid when the mortgage closed. Each discount point typically costs 1% of the mortgage amount. Only discount points paid to reduce the mortgage interest rate.
The actual amount you can deduct depends on several variables:
- Your filing status (married filing jointly, married filing separately, single, head of household)
- Your standard itemized deduction amount
- Your taxable income
- Other itemized deductions
Homeowners who itemize their tax returns can deduct property taxes they pay their main residence and other Real Estate property you own. This includes property taxes you paid from the date you purchased the property.
Beginning in 2018, the total amount of deductible state and local income taxes, including property taxes, is limited to $10,000.
What CAN'T be deducted?
- Homeowner Association dues
- Homeowners insurance
- Appraisal Fees
- Cost of home improvements (but, keep your receipts they may help reduce your taxes when it's time to sell your home)
As always, we recommend using a Certified Public Accountant (CPA) to assist with your tax filing. If you are in need of a CPA recommendation, our team would be happy to help!
FLORIDA RESIDENTS: Have you filed for Homestead Exemption?
The deadline to file for Homestead Exemption is March 1st.
If you own a home in Florida and reside there permanently and are a Florida resident as of January 1, you may qualify for Homestead exemption. Homestead can reduce the taxable value of your home as much as $50,000, saving you approximately $750 annually.
You cannot transfer your Homestead exemption when you move from a Florida Homestead property to a new Florida homestead. However, through portability, you may be eligible to transfer all or part of your Homestead assessment difference. This lowers the assessed value of the new Homestead property. You must file for Portability on a Form DR-501T along with a homestead application form.
Homestead Exemption can easily be filed using the link below!
Refer to the Florida Dept. Of Revenue or your County's Tax Appraiser website for all property tax exemptions and additional benefits.
Credits: Florida Dept. Of Revenue, NerdWallet, and TurboTax