There are several big tax breaks available from home credits that can help homeowners save money on their taxes. Here are some notable examples:
Mortgage Interest Deduction: This is one of the largest tax breaks for homeowners. You can deduct the interest paid on your mortgage loan, up to a certain limit, as an itemized deduction on your federal income tax return. The Tax Cuts and Jobs Act of 2017 reduced the mortgage interest deduction limit for new mortgages, but it still remains a significant tax break for many homeowners.
Property Tax Deduction: Homeowners can deduct the amount they pay in property taxes on their primary residence and any other real estate they own. The property tax deduction is an itemized deduction and can help reduce your taxable income.
Energy-Efficient Home Improvements: The Residential Energy-Efficient Property Credit allows homeowners to claim a tax credit for certain energy-efficient improvements made to their homes. This includes installing solar panels, solar-powered water heaters, wind turbines, geothermal heat pumps, and fuel cell systems. The credit is a percentage of the cost of the improvements and can provide substantial tax savings.
Home Office Deduction: If you use a part of your home regularly and exclusively for business purposes, you may be eligible for a home office deduction. This deduction allows you to deduct a portion of your home-related expenses, such as mortgage interest, property taxes, utilities, and home insurance, based on the percentage of your home used for business.
First-Time Homebuyer Credit: Although the federal first-time homebuyer credit was phased out in 2010, some states offer their own versions of this credit. These credits are designed to assist first-time homebuyers with their down payment or closing costs. Eligibility criteria and available amounts vary by state, so you should check with your state’s tax authority or a tax professional to see if you qualify.
It’s important to note that tax laws can change, and eligibility for these tax breaks may vary depending on your specific circumstances. It’s always a good idea to consult with a tax professional or refer to the latest tax guidelines to understand the most up-to-date information and determine your eligibility for these tax breaks.