Now that it is the beginning of the year everyone is preparing for tax season 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 significant changes made to the tax code, but this year not much has changed. Here is a quick rundown of some of the benefits that you can enjoy as a homeowner this tax season. Consult with your account for more details and about specifics on what is best and/or may apply to you.
If you got your mortgage before December 15, 2017 then you can deduct interest on a loan up to $1 million. If after this date, then only the first $750,000. The one thing to keep in mind is that mortgage interest is an itemized deduction so you should only decide to take this if all of your itemized deductions exceed the standard deduction. For married couples the standard deduction is $24,400, for individuals it is $12,200 and for head of households it is $18,350.
Private mortgage insurance
If you put less than 20% down on your home when you bought it then you are probably paying private mortgage insurance or “P.M.I.” You can take the deduction on the interest paid, but just bear in mind again that you only want to do so if your deductions exceed the standard deduction amounts.
Interest on a Home Equity Line of Credit
This is another way to add to your deductions. If you have taken out a HELOC (home equity line of credit) that is used to improve your property then you can deduct the interest on it. There are two stipulations for this being the loan must be for home improvements (not money taken out to purchase a car, pay down a credit card, 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 that file jointly. 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 worth taking it.
Full time home office
This is a good one for those who are self-employed and work completely at home. You can deduct $5 per foot of office space up to 300 square feet for a maximum deduction in the amount of $1,500. There are rules for this such as you cannot take this if you only sometimes work from home, but it can be a great deduction.
Home improvements for “aging in place”
If you are older, intend on staying in your home and need to make some adjustments to it then these can potentially be good deductions for you. You must have a doctor’s note affirming the necessary changes and the improvements will need to exceed 7.5% of your adjusted gross income. These improvements include things along the lines of widening doorways, adding wheelchair ramps, grab bars, etc.