Tax Deductions on your Primary Home
One of the benefits of owning your home is that you have many more tax deductions available to you versus just renting. On your primary home, you do get certain deductions that are not available to others – so take advantage of it. While you may be aware of the most common tax deductions available to you such as property taxes and mortgage interest, there are some other less common deductions that you may qualify for. If you already own your home, it couldn’t hurt you to check out these deductions. Here are the most common tax deductions available to primary home owners:
Mortgage interest deduction
This is one of the most well-known tax deductions for homeowners. You can deduct the interest you pay on your mortgage, up to a certain amount.
Property tax deduction
You can also deduct the property taxes you pay on your primary home. This deduction can be a significant savings for homeowners who have high property taxes.
Home office deduction
If you use part of your home for business purposes, you may be able to deduct a portion of your mortgage interest, property taxes, and other related expenses.
Capital gains exclusion
When you sell your primary home, you can exclude a certain amount of the capital gains from taxation. This exclusion can be a significant tax savings for homeowners who have lived in their home for a long time. When you sell your primary home, you can exclude up to $250,000 (or $500,000 for married couples filing jointly) of the capital gains from your taxes.
Energy-efficient home improvement tax credit
If you make energy-efficient improvements to your primary home, you may be eligible for a tax credit. This credit can save you up to 30% of the cost of the improvements, up to a maximum of $1,500.
Discount points tax deduction
If you paid discount points to get a lower interest rate on your mortgage, you can deduct those points in the year that you paid them. This deduction can save you hundreds or even thousands of dollars over the life of your loan.
Necessary home improvements tax deduction
If you make necessary improvements to your primary home, such as installing medical equipment or making accessibility improvements, you may be able to deduct the cost of those improvements.
Home equity loan tax deduction
If you take out a home equity loan or line of credit, you can deduct the interest you pay on that loan up to a certain amount. This deduction can save you thousands of dollars over the life of your loan.
Home selling costs tax deduction
If you sell your primary home, you can deduct certain selling costs, such as real estate commissions and legal fees. This deduction can save you thousands of dollars when you sell your home.
One-time Deduction – Federal Solar Tax Credit
Don’t forget about the tax credits that could be available to you for installing solar panels on your home. The Federal Solar Tax credit allows you to deduct 26% (in 2022) of the cost of installing solar panels on your home. This tax credit can save you thousands of dollars on your solar panel installation. With this Federal Solar Tax credit, you can deduct 26% of the cost of installing solar panels on your home directly from your federal taxes. If you install solar panels between 12/31/2022 and 01/01/2024, you can deduct 22% of the cost of your solar installation from your federal taxes.
As you can see, there are a number of tax deductions available to homeowners. Be sure to talk to your tax advisor to see which deductions you qualify for. And if you own a second home, there are even more deductions available to you. So don’t forget to take advantage of all the tax breaks available to you as a homeowner.