Monday, April 9, 2018

6 Common Homeowner Tax Deductions and How They'll Change in 2018

Owning your own home comes with responsibilities, but it also comes with many advantages, particularly ones that are to your financial benefit. When you own your own property, it allows you to establish a permanent place of residence, which provides the opportunity to build equity, and it also allows you to lock in your monthly costs for as long as you live there. Additionally, even as changes are on the horizon for 2018, homeownership also offers many opportunities for potential tax benefits.

Here are six possible tax breaks that homeownership can potentially provide. (Be sure to consult your tax professional regarding tax deductions and eligibility!)

  1. Mortgage Interest. Mortgage interest is tax deductible on loans up to $1 million (for homes bought before Dec. 17, 2017) or $750,000 (any home bought after Dec. 17, 2017). Points paid on your mortgage can be deductible on your taxes if you purchased your home within the last year.
  2. Property Taxes. Homeowners can deduct property taxes they are paying for their home. This deduction will have a $10,000 cap in 2018, though there is no cap for 2017.
  3. Private Mortgage Insurance. If you didn’t put a 20% down payment on your home, you’re likely paying Private Mortgage Insurance, known as PMI, until you reach a 20% investment in your home. You may be able to deduct these on your 2017 taxes.
  4. Medical Improvements. If you are improving your home due to medical necessity, such as adding a ramp or elevator for access, you can deduct the cost of those improvements and the maintenance on your taxes. You will need to prove these additions are necessary for medical reasons with appropriate documentation.
  5. Home Office. Home offices are a $5-per-square-foot deduction up to 300 square feet of office space, maxing out at $1,500. Your office must be a dedicated work space. For 2018, however, you cannot apply for this deduction if you work for any length of time at an office location.
  6. Home Equity Line of Credit. Many homeowners take out Home Equity Loans or lines of credit to pay for a multitude of things, from school tuition to home improvement projects. You can deduct the interest regardless of what the loan was used for in 2017, but in 2018, you’ll only be able to deduct interest if you are using the money for home improvements.

To find out more about what potential tax breaks you could qualify for, reach out to your tax professional. If you’re interested in pursuing homeownership, reach out to one of our real estate sales professionals today!