Owning a home is a significant financial milestone, but it also comes with various expenses. Thankfully, homeownership offers financial perks in the form of tax breaks that can make it more affordable. Whether you’re a first-time buyer or a long-time homeowner, understanding these benefits can save you money. Here are 7 tax breaks for homeowners to consider when filing your taxes.

Standard vs. Itemized Deductions

Before diving into the specific tax breaks, it’s essential to understand the difference between standard and itemized deductions. Homeowners can claim certain deductions if they itemize, which involves listing eligible expenses rather than taking the standard deduction. While standard deductions simplify the process, itemizing can unlock significant savings, particularly for homeowners who qualify for deductions tied to mortgage interest and property taxes.

1. Mortgage Interest Deduction

One of the most well-known 7 tax breaks for homeowners is the mortgage interest deduction. Homeowners can deduct interest on up to $750,000 of mortgage debt if they file jointly, or $375,000 for those filing separately. This deduction can result in substantial savings, particularly in the early years of a mortgage when interest payments are higher.

2. Deduction for Property Taxes

Property taxes are another major expense for homeowners, but they can also be a source of tax savings. The IRS allows deductions for state and local property taxes, capped at $10,000 per year. Keep in mind this cap also includes income and sales taxes combined.

3. Tax Benefits for Home Equity Loans

If you’ve taken out a home equity loan or line of credit (HELOC), you might be able to deduct the interest, provided the funds were used to buy, build, or improve your home. This deduction counts toward the same $750,000 mortgage debt limit.

4. Mortgage Tax Credit

Designed to help low-income, first-time buyers, the mortgage tax credit reduces tax liability dollar-for-dollar. This program, often available through local housing agencies, provides significant assistance for qualifying homeowners.

5. Tax Savings for Home Improvements

Certain home improvements, like energy-efficient upgrades or medically necessary modifications, may qualify for tax deductions or credits. For example, installing solar panels or making accessibility changes can help reduce your tax bill while improving your home.

6. Deducting Discount Points

When buying a home, you may have the option to purchase discount points to lower your interest rate. These points are often tax-deductible in the year they are paid, offering additional savings.

7. Home Office Deduction for the Self-Employed

If you use a portion of your home exclusively for business purposes, you may qualify for a home office deduction. This deduction applies to self-employed individuals who meet the IRS requirements for maintaining a primary place of business.

Expenses That Aren’t Deductible

While there are many tax benefits for homeowners, certain expenses like home repairs, homeowner association fees, and utility bills aren’t deductible. However, staying informed about the 7 tax breaks for homeowners can help you maximize your savings.

Get Help With Tax Planning

Understanding and leveraging these 7 tax breaks for homeowners can make a big difference in your financial planning. Consider consulting a tax professional to determine which deductions and credits apply to you and how to optimize your savings. Owning a home is expensive, but these tax breaks can help offset the costs and make your investment more rewarding.

If you ever need expert assistance or guidance on your credit journey, don’t hesitate to reach out to the Nerds! Additionally, stay updated with the latest tips and information by following us on Facebook, Instagram and TikTok!