Owning a home is a dream come true for many, but it also comes with its share of costs. From mortgage payments to repairs, the expenses can add up fast. The good news? Your home can help you save money— if you know where to look.
When it comes to tax deductions and property tax savings might not be the most thrilling part of homeownership, but they’re potential savings you don’t have to leave on the table. Check out how homeowners can use these two big areas to keep more cash in their pockets.
1. Tax Deductions: Get Your Home to Work for You
Owning a home offers several tax benefits, but many homeowners don’t take full advantage. Here’s what you should keep an eye on:
Mortgage Interest
If you’re paying a mortgage, you can likely deduct the interest you pay each year. This is one of the biggest perks for most homeowners, as this deduction reduces taxable income significantly.
The IRS allows you to deduct the interest on up to:
- $750,000 of mortgage debt for a primary or secondary home.
- $1 million if your loan is from before December 2017.
Considering that mortgage interest is front-loaded (meaning you pay more in the early years of your loan), this deduction can be a game-changer for new homeowners.
Pro Tip: Keep an eye on your Form 1098 (your lender will send this annually), which details exactly how much mortgage interest you paid.
Property Taxes
Property taxes are deductible, but the IRS caps the combined deduction for state and local taxes (SALT) at $10,000. If your property taxes alone exceed that, you’re out of luck for the remainder—but don’t skip this deduction if you qualify.
Pro Tip: Make sure you’re not double-counting property taxes if they’re already paid through an escrow account managed by your lender.
Energy-Efficient Upgrades
Did you swap out that ancient HVAC system or install solar panels? Under the Inflation Reduction Act, homeowners can claim up to a 30% tax credit on the cost of solar, wind, or geothermal energy systems through 2032.
Smaller energy-efficient upgrades (like heat pumps or upgraded windows) may qualify for separate credits.
Pro Tip: Save all receipts and certifications for eligible improvements. Without documentation, you might miss out on this credit.
Home Office Deduction
If you’re one of the millions working remotely, a home office deduction could be your golden ticket. Even if you’re a renter, this deduction applies to you!
- The simplified method lets you claim $5 per square foot, up to 300 square feet ($1,500 max).
- The regular method takes a bit more math but might yield a higher deduction.
The space must be used exclusively and regularly for work.
Medical Home Modifications
Upgrades made to accommodate medical needs—like wheelchair ramps or stairlifts—can be deducted as medical expenses if they don’t increase your home’s value.
Pro Tip: A letter from your doctor recommending the modification can help strengthen your claim if the IRS asks questions.
Points Paid on Your Mortgage
If you paid points to get a better rate on your mortgage, those costs could be deductible, too. This is especially helpful for first-time buyers navigating the upfront costs of homeownership. The deduction may be spread over the life of the loan, but in some cases, you can claim the full amount the year you paid them.
Pro Tip: Points paid during refinancing may also be deductible, but only for the portion of the loan used to improve your home.
2. Saving on Property Taxes: It’s All About Strategy
Property taxes can feel like an inevitable burden, but there are ways to keep them in check. Here’s how:
Appeal Your Assessment
If your home’s assessed value feels wildly out of sync with reality, challenge it. Most jurisdictions allow homeowners to appeal their property assessments within a specific time frame. Research comparable home sales in your area to back up your claim.
Pro Tip: Even small discrepancies, like an overestimated lot size or an inflated bedroom count, could lower your taxes.
Explore Exemptions
States and local governments often offer property tax exemptions. Popular ones include:
- Homestead Exemptions: Lowers the taxable value of your primary residence.
- Senior Citizen Exemptions: For homeowners of a certain age.
- Veteran Exemptions: For military veterans or their surviving spouses.
- Disability Exemptions: For those with qualifying disabilities.
Pro Tip: Some exemptions require annual renewal. Set a calendar reminder to avoid missing out.
Check for Errors
Errors happen. Your property’s assessed value could be based on outdated or incorrect information, like overstated square footage or the existence of a basement that doesn’t exist.
Pro Tip: Request a copy of your property’s assessment record and check it for mistakes.
Renovate with Timing in Mind
Making big-ticket renovations? Wait until after your next property tax assessment to avoid an immediate increase in your home’s assessed value.
Pro Tip: Cosmetic upgrades, like painting or landscaping, are less likely to trigger a reassessment than structural changes.
Take Advantage of Discounts
Many counties offer early payment discounts, often ranging from 1% to 3%. While it’s not a huge amount, these savings can add up over the years.
Pro Tip: Consider paying your property taxes semi-annually or quarterly if your local government allows it. Breaking it into smaller chunks can make it feel more manageable.
Putting It All Together
Being a homeowner can feel expensive, but knowing where to find savings makes all the difference. From federal tax breaks to local property tax strategies, there are plenty of ways to lighten the financial load.
Want to make the most of these tips? Here’s a quick checklist:
- Review your mortgage statements and tax documents annually.
- Consult a tax professional to ensure you’re claiming every deduction and credit you’re eligible for.
- Check your property’s assessment record for errors.
- Research local exemptions and file appeals when necessary.
Every dollar saved is a dollar that stays in your pocket. Homeownership is an investment, but that doesn’t mean you can’t minimize the costs along the way. Start small, be consistent, and watch those savings add up.
Have questions about your specific situation? Talk to a tax professional or your local tax assessor’s office to get tailored advice—and then enjoy the peace of mind that comes with knowing your home is saving you money.
By Admin –
