Homeowners Get Good News About Taxes!

Homeowners Get Good News About Taxes!

It is no secret that inflation is taking a toll on our pocketbooks as the cost of living continues to rise.

On the bright side, the recent Inflation Reduction Act includes some adjustments that can help taxpayers save more money for the 2023 tax year.

The new tax rate schedules will increase the income thresholds for each tax bracket, allowing you to retain a larger portion of your earnings. Even better, the IRS has raised the standard deduction for both married couples and those filing individually—the largest adjustment to deductions since 1985.

I’m a real estate agent not a CPA, so why am I talking about taxes? Good question!

I thought I’d take this opportunity to remind you about several tax benefits you can take advantage of as a homeowner. As tax season approaches it’s important to stay abreast of any recent tax changes that might impact you.

Homeowner Tax Breaks

Whether it is deductions or tax credits specifically for homeowners, you have the opportunity to keep more money in your pocket when you own a home.

Let’s look at some of the general tax perks you can benefit from right now as a homeowner. Of course, you will want to consult with your own tax advisor for personal tax advice before doing anything.

• Mortgage Interest. Interest paid on home loans is deductible up to $750,000 for a principal residence, which includes your second home.  This can mean up to hundreds, even thousands of dollars in tax savings every year.  Ask a tax advisor what your savings could be as everyone’s situation is different depending on tax bracket, mortgage amount, etc.

• Property taxes. All real estate property taxes are fully deductible. This means additional tax savings and more money to keep in your pocket. 

• Credit for Green Improvements. This is not a tax break, but a credit. Homeowners are allowed to take up to $500 off their federal income tax for making certain improvements that increase the energy efficiency of their homes such as a water heater, furnace, boiler, heat pump, windows, or roofing.  Right now, this tax credit is approved through 2023 only.

• Investment Property/Rental Property. The cost of maintaining and marketing a rental property can be deducted from the income the property generates without regard to the owner’s tax classification. These expenses include mortgage interest, insurance, utilities, maintenance and repairs, advertising, and management fees, as well as the benefit of reduced taxable income from the non-cash cost of depreciation.

• Home Office. You can deduct the costs of a home office that you use exclusively as your principal place of business. Since many of you may have started working from home in recent years, make sure you know the specifics to get any deductions available to you.

• Tax-Free Rental Income. If you rent out your own home for 14 or fewer days during the year, the rental income is tax-free.

As you can see, there are several ways you can save on your taxes and reap the benefits of homeownership.

I’m Here to Help

Never hesitate to reach out to me with any questions when it comes to your home. And if you’d like to get more details about any of the homeowner tax perks discussed above, reach out to a Certified Public Accountant or me—I can recommend someone to assist you.