Being a homeowner is much different than being a renter. Along with building equity and having the entire property to yourself, owning a home also gives you access to many tax benefits. Before the next tax season rolls around, learn how to take advantage of the tax benefits available to you.
Take Advantage of Energy Efficiency Credits
You can reduce your taxes by taking advantage of energy efficiency improvements. These credits became available to homeowners through the Inflation Reduction Act, passed in 2022. When you upgrade your HVAC system or add insulation to your home, you can claim a federal tax credit. Adding solar panels also qualifies as an energy efficiency improvement. Make sure you keep all your receipts if you want to claim this credit.
For 2023, households can claim as much as 30% of the project costs for various improvements. The total amount you can claim in a single year is $1,200 alongside a $150 credit for a home energy audit. If you have a heat pump installed in your home, you can claim a credit as high as 30% of the project costs. The maximum benefit for a heat pump is $2,000.
Deduct Home Office Expenses
If you work from home as a self-employed individual, you can deduct home office expenses if your workspace passes the "exclusive use" test. You can claim this benefit even if you don't itemize your deductions. The types of expenses that can qualify for deduction include:
Office furniture
Printers, scanners, and computer monitors
Maintenance
Mortgage interest
Insurance
And some good news if you’re a renter in this situation: rent is eligible for deduction as well.
Deduct Home Equity Loan Interest
If you take out a line of credit or home equity loan, you can deduct the interest that you pay on the loan during the year. Keep in mind that this tax break is only available if you use the money to improve your existing home or buy a new one.
It's also essential that you itemize your deductions. Projects that would qualify include HVAC upgrades, new roofs, and remodeling projects. Interest is wholly deductible for up to $750,000 of qualified residential loans.
Benefit from the Mortgage Interest Deduction
If you itemize your deductions, you can write off the money you paid for mortgage interest during the year. You can deduct the interest on up to $1 million of mortgage debt. Limits vary based on when you took out your loan and your marital status when filing.
As a homeowner, you can benefit from numerous tax breaks and deductions during the next tax season. Claiming these deductions allows you to save a considerable sum of money every year.
To learn more about specific tax rules in your area and the benefits you can receive for owning a home, visit the IRS website.