Deductions could make tax season less painful. And owning a home might help you save some serious cash on your taxes. Here are ways you could save:
Mortgage interest deduction
According to NerdWallet, mortgage interest deduction is usually the biggest tax deduction for homeowners who itemize. You can deduct the interest you paid on your mortgage, up to a certain amount.
How much can you deduct? It depends on when you got your mortgage. If it was after Dec. 15, 2017, you can deduct interest on up to $750K of mortgage debt. Got an older mortgage? You might be able to deduct more.
Property taxes
You can get a break for paying property taxes too. But according to Ally Bank, there’s a cap: You can deduct up to $10K (or $5K if you’re married and filing separately) for state and local property, income, and general sales taxes combined. So if you’re in a high-tax area, you might hit that limit quickly.
Work-from-home perks
Working from home and self-employed? If you use part of your home just for business, you might be able to deduct some of your home expenses.
Discount points
Remember those points you paid to lower your mortgage interest rate? (One discount point costs 1% of the mortgage.) Those might be deductible too. The IRS considers them prepaid interest, so you can usually deduct them over the life of your loan, according to NerdWallet.
Energy-efficient upgrades
If you’ve gone green with some energy-efficient upgrades, the government might give you more than a nod of approval. According to Ally Bank, there’s a “residential energy credit”
for homes updated after 2022 with things like energy-efficient windows or solar panels.
What you can’t deduct
Still, there are some things you can’t deduct. Rocket Mortgage has a handy list that includes:
- Homeowners insurance premiums
- Homeowners association fees
- utilities
- depreciation
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