Home ownership is a major goal for many people, but it can be out of reach for those who are not aware of the tax breaks available to them. In this blog post, we will discuss 6 types of tax breaks that can help you afford home ownership. We will also provide information on how to claim these tax breaks. So if you are looking to buy a home in the near future, be sure to read this blog post!
1. Tax breaks for first-time homebuyers
If you are a first-time homebuyer, there are several tax breaks that you may be eligible for. For example, you can get up to $15,000 off the purchase price of your home if it is your primary residence. You may also be able to deduct mortgage interest or property taxes on this home from your federal income tax return. If you are eligible for any other tax breaks such as student loan interest or charitable contributions, these will still apply even if they are not used to pay down debt.
2. Mortgage interest deduction
If you are the owner of a home, you may be able to deduct the interest that you pay on your mortgage from your federal income tax return. This deduction can be especially beneficial for those who itemize their deductions. The amount of this deduction will depend on the amount of debt that you have accrued, as well as your taxable income.
If you are in the process of purchasing your home and have not yet closed on it, then there may be other options available to you. For example, there is still time to deduct any interest that has accrued during the process of purchasing it.
If you decide to itemize deductions instead of taking the standard deduction, then be sure to include all interest payments from mortgages and other loans on Schedule A Form (and attach Schedule A) so that they can be deducted from your taxable income.
3. Property tax deduction
If you are the owner of a home, you may also be able to deduct the property taxes that you pay from your federal income tax return. The amount of this deduction will depend on the state in which you live, as well as your taxable income.
Be sure to keep track of all payments made for property taxes throughout the year, including those paid by escrow companies or other third parties. This information should be included when filing your federal income tax returns.
If you decide to itemize deductions instead of taking the standard deduction, then be sure to include all property taxes on Schedule A Form (and attach Schedule A) so that they can be deducted from your taxable income.
4. Capital gains exclusion on the sale of a primary residence
If you have owned and lived in your home for at least two of the past five years, then you may be able to exclude up to $250,000 in capital gains on the sale of your home. This exclusion will apply to each individual, so if you are married filing jointly, then you can exclude up to $500,000 in capital gains on the sale of your home.
To qualify for this exclusion, the home must be your primary residence and you must have lived in it for at least two of the past five years. You must also have sold it for an amount that is equal to or less than the sale price that you originally paid for it.
5. Home office deduction
If you use a portion of your home for business purposes, you may be able to deduct this usage from your federal income tax return. The amount that you can deduct will depend on the percentage of your home that is used for business purposes, as well as your taxable income.
To qualify for this deduction, the space must be used regularly and exclusively for business purposes. If you work from home and use your garage as part of an office, then it is likely that this deduction will apply to you.
You can also deduct the cost of utilities and other expenses related to operating a business out of your home if they are directly attributable to the operation of that business.
Be sure to keep track of all expenses related to your home office, as these can be deducted from your taxable income.
6. Energy-efficiency tax credits
If you have made energy-efficient improvements to your home, you may be able to receive a tax credit for these improvements. The amount of the tax credit will depend on the type of improvement that was made, as well as your taxable income.
Some common examples of energy-efficiency improvements include adding insulation, installing a new roof, and replacing a furnace or air conditioner.
The amount of the tax credit will be based on how much energy is saved by each improvement, which may differ from one type of improvement to another. For example, adding insulation could save up to $500 in energy costs over its lifetime while installing a new roof might only save about $250 in energy costs.
Keep in mind that there are many other types of tax breaks available to homeowners, and these examples are not exhaustive. Be sure to talk with an accountant or other financial professional before making any decisions about energy-efficient improvements to your home, as some may have a negative impact on the amount that you can claim in tax credits.
That’s all for now! We hope this gave you a good overview of the different types of tax breaks available to homeowners. Stay tuned for more updates and tips, as well as information on how to best take advantage of these breaks. In the meantime, if you have any questions or would like assistance in filing your taxes, be sure to reach out to a tax expert. Thanks for reading!
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