As we are in tax season everyone is preparing by gathering up all of their necessary documents to either do their own taxes or send everything off to their accountant to complete. Last year there were changes made to the tax code, but this year not much is different. Here is a good refresher regarding the benefits that you can enjoy by being a homeowner. Be sure to check with your account for more details on what is best and/or applies for you.
If you started your mortgage before December 15, 2017 then you can deduct interest up to $1 million, but if after, then only the first $750,000. The thing to note on this is that mortgage interest is an itemized deduction so you should only take this if all of your itemized deductions exceed the standard deduction amount. For married couples the amount is $24,400, for individuals it is $12,200 and for head of households it is $18,350.
Private mortgage insurance
If your down payment was less than 20% on your home when you purchased it then you are most likely paying private mortgage insurance or “P.M.I.” You can take the deduction of the interest that you paid on this, but again just keep in mind that you only want to do so if your deductions exceed the standard deduction.
Interest on a HELOC
This is another way to help add to your deductions. If you have taken out a HELOC (home equity line of credit) that is used to make improvements to your property then you can deduct the interest. The two stipulations are the loan must be for home improvements (not money taken out to pay off credit card debt or pay for a wedding, etc.) and the total amount of combined interest that can be deducted for your primary loan and the HELOC is capped at $750,000.
This amount is capped at $10,000 for a deduction for married couples filing jointly. Once again, this is important to note where all of your deductions must add up to more than the standard deduction ($24,400 for a married couple) for it to be beneficial to you.
This is a great option for anyone who is self-employed and works from home where you can deduct $5 per foot of office space up to 300 square feet for a maximum deduction of $1,500. There are rules set in place for this such as you cannot take this if you only occasionally work from home, it can be a great deduction.
Home improvements for “aging in place”
If you are of an older age, plan on staying in your home and need to make some necessary adjustments to remain in it then these can potentially be deductions. Stipulations are that you will need to have a doctor’s note affirming the necessary changes and the improvements will need to exceed 7.5% of your adjusted gross income. Improvements may include things like widening doorways, adding wheelchair ramps, grab bars, etc.