As we move closer to the spring season, the tax filing deadlines draw nearer, signaling a crucial time for preparation and organization. In the US, the deadline for most people to file their taxes is on April 15, 2024, however depending on your circumstances you can request more time.
As a homeowner in the US, you have access to specific deductions and strategies that can maximize the financial benefits of owning a home. Whether this is your first year filing as a new homeowner or you’re a seasoned property owner looking to maximize your tax benefits, here are some essential tips to consider when filing your US taxes this year:
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The Documents You Need:
The first step in filing your taxes is getting yourself organized. There are quite a few documents homeowners need to gather to claim deductions, such as:
- Mortgage Interest Statement
- Statements regarding Mortgage Insurance Premiums
- Property Tax Statements
- Receipts and certifications for energy-efficient home improvements
- Record of home office expenses including utility expenses and insurance
- Closing statements if you sold your home
Claiming Property Tax Deductions
If you’re a homeowner, then paying property taxes is an unavoidable responsibility. However, the property tax deduction is a valuable opportunity to reduce your taxable income. If you’re single or married filing separately, you can deduct $5,000, while married couples filing jointly can deduct $10,000.
Take Advantage of the Mortgage Interest Deduction
Like many homeowners, you probably have a mortgage, and you were likely impacted by increasing rate hikes in 2023. However, one of the most significant tax benefits of homeownership is the opportunity to deduct mortgage interest. If you’re married filing separately, you can deduct interest on up to $375,000 of mortgage debt. If you’re married and filing jointly or a single filer, the limit significantly increases and you can deduct interest on up to $750,000 of mortgage debt.
Energy-Efficient Home Improvement Credits
The tax code encourages homeowners to make energy-efficient improvements to their homes by offering energy-efficient home improvement tax credits. Qualifying expenses include skylights, insulation materials, solar water heaters, battery storage, central air conditioners, and heat pumps.
It’s important to remember that to receive this credit, home improvements must be made on your primary residence and do not apply to newly built homes. The amount of credit you can claim varies but is typically around 30% of the cost of the qualifying improvements.
Remote Workers Can Use the Home Office Deduction
With the rise of remote work, the home office deduction has become even more relevant for many homeowners. If you use part of your home exclusively for business, you may be eligible to deduct expenses related to that portion of your home. This deduction can include a portion of your mortgage interest, property taxes, utilities, and maintenance costs.
Sold Your Home in 2023? You Might Qualify for a Deduction
If you sold your home in 2023, you might qualify for the capital gains exclusion. Single filers can exclude up to $250,000 of gain from their income, while married couples filing jointly can exclude up to $500,000. To qualify, you must have owned and used the home as your primary residence for at least two out of the five years before the sale.
For example, if you bought your home in 2018 for $300,000 and then sold it in 2023 for $500,000, you made a $200,000 profit. This is under the $250,000 limit and so it is exempt from capital gains tax.
Tax refunds are never a guarantee, so it’s also important to speak with a knowledgeable accountant or tax consultant about your situation to get the most out of your refund.
