Well, January has come and gone, which means that many people are rushing to get their taxes done! Owning a home not only provides pride in ownership, it also provides some great tax breaks. As a new homeowner, you may not realize all the different deductions that are available to you. Remember for a few of these tax breaks, require certain records and proper documentation. It is a good habit to get into to keep house records throughout the year.
While these certainly are not the only homeowner tax breaks, here are a few to get you started.
- Mortgage interest.
If you have a mortgage on your home, then you are paying mortgage interest with each monthly payment that you make. The interest that you pay is eligible to be deducted from your tax bill up to a certain point. You should receive a 1098 form that will have what you paid throughout the year on there to help you when it comes time to file.
- Property taxes.
What you pay each year towards your property taxes is also tax-deductible, but again, only up to a certain amount. Depending on where you live and the local laws, you might be able to write the full amount off, or you can only write off a portion. Make sure to keep your property tax documents to reference when filing your taxes.
- Private Mortgage Insurance.
Private mortgage insurance, or PMI, is something you most likely have included in your monthly mortgage payment if you put down less than 20 percent on your home. Mortgage insurance payments are tax-deductible for the 2021 tax year. However, the more money you make, the less you can claim.
- Home office expenses.
If you run a home business and had a section of your home exclusively dedicated as a home office, you may be eligible for more tax breaks! This is based on things such as depreciation, utilities, and any security systems. The amount you can write off is propionate to the square footage of your home that is used for business purposes.
- Home improvement.
This one applies to you if you had to make medically necessary improvements to your home throughout the year. For example, if you had to install a wheelchair ramp or make bathroom modifications necessary for you, your spouse, or a dependent. You may also be able to claim a home improvement tax break if you made improvements to your home to be more energy-efficient. This includes items such as solar electricity, solar water heaters, or geothermal heat pumps.
There are many other homeowner tax breaks that you might be able to qualify for, depending on your situation. However, remember that just because these can be deducted, things such as homeowner association fees or your utility bills cannot be. Always make sure to check with a local tax professional.