We are often asked about homeownership tax strategy – below are the main ones we see. I hope this helps with your taxes and tax planning!
The basic ones:💡
- Mortgage interest – remember, there is a cap on this for high-value homes, so keep this in mind when planning your taxes & next real estate purchase
- Mortgage points deduction on your personal returns
- Property tax deduction – there is a cap on this one, as well, for some situations
- Business use of home deduction for those with self-employment or 1099 income
- HELOC – Interest from home equity line of credit
The confusing ones: 💭
Now, we can go into the confusing part that we see daily:
Home improvements – are these actually deductible? The answer is, sort of:
- If you have a home office, you can deduct part of this as it pertains to your home office. However, this only applies to 1099s or certain business situations
- If you use the home as a rental income property
- If the above two do not apply, then you have a strictly personal expense that is not currently deductible but can eventually be a deduction once you sell the home. The way this works is a bit complicated and certain rules apply & certain recordkeeping is required
Home damage as a result of flooding, fire, or other disasters
- This used to be deductible prior to the 2018 tax code changes
- Now, it is only deductible if part of a federally designated disaster (and it will appear on the IRS website as such based on your location)
The Green Energy ones: 🌲
EV charging station installation – up to $1000 tax credit – related: EV purchase up to $7500 tax credit if qualified (may change in March 2023)
Residential clean energy credit – 30% back on any money you spent installing solar electricity, solar water heating, wind energy, geothermal heat pumps, biomass fuel systems or fuel cell property. The only limit is for fuel cell property — $500 for each half a kilowatt of capacity
Energy efficient home improvement credit – two types:
- Residential energy property – flat tax credit of $50 to $300 for installing Energy Star-certified items like heat pumps, water heaters or furnaces
- Qualified energy efficiency improvements – $500 lifetime limit for all improvements made after 2005. Starting in 2023, the Inflation Reduction Act will replace the $500 lifetime limit with a $1,200 annual limit for the tax credit.
Each one of the above is an article in itself, so I do not want to give you too much, but if you have interest in any of the above, please kindly specify contacting us through the box below and we can coordinate from there.
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