They say there are only two things certain in life: death and taxes.
But what about tax deductions? Well, I’m certain of this too: saving money on taxes is something we can all get behind!
As we learned in last month’s blog, tax deductions can make all the difference in overall costs when you compare renting vs. buying. So it’s definitely in your best interest to max out all the benefits of homeownership each year when you file your taxes.
Important note: these deductions only work for those who itemize their taxes. If your medical, income, property, and charitable deductions run more than the IRS-allowed standard deduction ($12,900 for single filers this year, $25,900 for filing jointly) then you’ll want to itemize and include these deductions.
Here are 5 deductions to check for when filing this year:
If you have a mortgage on your home, you can take advantage of the mortgage interest deduction the year you buy and every year thereafter. The write-off limit is $750,000 for homeowners filing as a single filer or a married couple filing jointly. If you’re married but filing separately, the deduction limit is $375,000 each. And by the way, interest on home equity loans can also be deducted if used for home improvements.
Homeowners pay property taxes to the state of Louisiana and their local town or municipality. You can deduct up to $10,000 of property taxes as a married couple filing jointly – or $5,000 if you are single or married filing separately. The swankier your neighborhood, the more handsome your tax deduction.
Home Office Expenses
With more people than ever working from home, that gives us one reason to celebrate work: tax write-offs! When you operate a business in your residence, you can deduct some of the expense of maintaining that space. Do your homework! (Get it… home? work?) IRS regulations are strict here and you have to be using your office space for regular and exclusive business to qualify for a deduction. So working on your bed doesn’t count, but if you set up a corner desk in your bedroom and use it exclusively for work, measure the area and deduct it as a percentage of your total square footage.
Necessary Home Improvements
Yes, we’d all like to think that a new granite counter and mosaic glass backsplash in the kitchen are necessary. But this write-off is reserved for true necessities like adding a wheelchair ramp or safety railings. When in doubt, talk to a tax expert.
Private Mortgage Insurance
When you buy a home and make a down payment of less than 20% of the value of the home, your lender might require you to purchase private mortgage insurance (PMI) to protect them in the event of a default. If you have PMI, you might be able to deduct the expense. But beware! Only certain levels of adjusted gross income qualify. The rules seem to change constantly on this option and while it was set to expire as a deduction last year, legislation narrowly saved it for the 2021 tax year.
Grab your calculator and get itemizing. Each of these line items on your taxes is a good reminder of why homeownership makes fiscal sense for your overall bottom line!
And speaking of professionalism, when it comes to buying and selling a home, keep Clean Title, LLC, in mind. We’re researching the past to protect your future!
Don’t miss our popular Title FAQs for tips that will give you the peace of mind only a clean title can. See us on our Facebook page and check out the details of our services on our website. Or call 985-277-5095 to speak to one of our title professionals today!