If you have the privilege of owning a home, you might be interested in knowing how you can save money at tax time due to the fact that you are a home owner. It is important to understand how you can save money during tax time because homeowners get some tax write-offs and you could potentially save hundreds of dollars if you are aware of such. Be sure to consider the following tax write-offs when you do your taxes. It is a great idea to talk to a tax professional about tax credits as well, as they are knowledgeable and can assist you in saving money.
First-time homebuyer’s credit
There is a credit called the “first time homebuyer’s credit” and it applies when you purchase a home between January and April of the year you are due to file taxes. Even if you have purchased a home before, you still may be eligible for this credit, but usually you won’t qualify if you have owned a home the past three years.
Mortgage interest deduction
The interest that you paid on your mortgage is a wonderful tax benefit. This is especially helpful for homeowners who recently bought their home because the payments for the first few years of the loan are usually made up of mostly interest.
Home improvement loan
If you took out a home improvement loan, you may be eligible for a loan interest deduction. If the balance of the loan is $100,000 or less, the interest is deductible. This is for adding improvements to the home via construction and not simply maintenance things like adding carpet or painting the home.
Home energy credits
With the Go Green revolution, homeowners have been more conscious of purchasing energy efficient appliances and features in their homes. If you have done so, you can qualify for a tax credit. Energy efficient appliances like water heaters, energy-efficient windows, furnace or air conditioner, doors, etc. could get you a 30% tax credit on what it cost you to install the features. You can top the credit at $1,500.
In addition to such energy-efficient products, if you have installed solar panels, solar water heaters, geothermal heat pumps, or wind panels, you can take a 30% tax credit on the cost of the product and not just the installation cost.
If you relocated due to a job and the distance was more than 50 miles, you can take a tax credit for moving expenses. You can deduct your cost for accommodations, gas, and moving truck expenses as well.
Property tax deductions
You may be able to take a deduction for property taxes that you paid during the year and in doing so, this will help increase the standard deduction on your return. This could help you to add $500 to the standard deduction if you’re single and $1000 if you’re married filing jointly. If you have rental investments, you may be able to deduct property taxes on IRS form Schedule E.
If you have sold real estate
If in the past year you have sold a home, singles can claim up to $250,000 of profit tax free and those who are married can claim up to $500,000 tax-free. To earn this deduction, you must have lived in the home for at least two of the past five years. You could have rented it out for the other three years.
Home damage deductions
If you experienced a home fire, burglary, or if your home was damaged in a storm, you may be able to get a deduction. To do so, take the cost of the casualty or theft, subtract $100 and then subtract 10% of your adjusted gross income.
Home office deduction
If you have had a home office during the tax year, you can deduct a certain percentage of your utilities, mortgage, and any repair bills associated with that space. It is important to be aware of some rules that apply to this deduction. First, you must have used your home office as your primary place of business. You must have spent most of your time working from your home office and the room designated for the office cannot be a space like the kitchen.
Some people say that the home office deduction can raise red flags to the IRS and an audit may be completed, so be sure that your home office is your primary place of business, that you have a separate room for the office, and that the size of the office is relative to your business. You don’t want to say your office is 1000 square feet when your house in only 1800 square feet. Be realistic.
These are just some of the ways a homeowner can save money during tax time. You might also be eligible for tax deductions if you have other things like an RV, boat, or a vacation home. If you are not a tax expert, it is probably your best bet to hire a tax professional to do your taxes for you. They know the IRS laws that apply to your situation and they will do you right. In fact, they may be able to save you hundreds of dollars at tax time because they know taxes and you might miss some key deductions. You might also raise some red flags if you do not know what you are doing.
Being a homeowner is a wonderful thing and knowing that owning a home can help you out at tax time ought to bring a smile to your face. Be sure to keep good records of what you put into your home (energy efficient products), any home improvements you make, utility bills if you have a home office, and anything else that pertains to taxes. Keeping receipts in a special place is always a good idea as well. That way when tax time comes around you already have everything ready to hand to your tax professional.