So you bought a house last year. Sure, it cost you a hefty down payment and some closing costs, but it’s all about to pay off — you may finally qualify for all those valuable tax deductions that some homeowners get to leverage.
It’s true: the tax deductions can be one of the best parts of being a homeowner. Not only do they have the potential to reduce your tax burden significantly, but they might even give your refund a boost, too — and that means more cash to put in savings, toward retirement, or even on paying down your mortgage.
Want to make sure you’re taking full advantage of those homeownership tax perks? Here’s everything you’ll want on your radar when you go to meet with your tax professional:
- Mortgage interest deductions – Mortgage loan interest may be tax deductible, unlike some other types of loans. Consult a tax advisor to see if this is true for you. In some cases, any interest you pay on your mortgage can be fully deducted from your taxes (as long as your mortgage is $750,000 or less). If you bought your home before December 15, 2017, the maximum is $1 million.
- Discount points – Discount points allow you to lower your interest rate when purchasing your home. When you pay for a point, you’re essentially pre-paying interest. Since mortgage interest may be deductible, discount points may be as well. You can deduct the full total you spent on points at closing, with no set maximum. In the future, if you decide to refinance your mortgage loan, you can also deduct points for that year as well.
- Property taxes – Property taxes are also fully deductible, up to $10,000. If your property taxes come in under $10,000, you should also be able to write off sales tax paid on your home or even state income tax up to the $10K.
- Home office deductions – Do you work from home or use a specific area of it just for business purposes? If so, you may be able to deduct a whole slew of associated costs. Write off portions of your home insurance, lawn maintenance, repair costs, utility bills, and more, as well as overall depreciation of the home.
- Home equity loan interest – If you just purchased the property, you likely don’t have enough equity in the home to take out a home equity loan or line of credit just yet. If you did, though, you’d be allowed to write off any interest paid on those loans up to $100,000.
Due to recent tax changes, the previous deduction on private mortgage insurance is no longer available. There’s a chance the deduction may be revived, though, so keep it on your radar for future tax seasons. Nothing in this blog is professional financial advice (we leave that up to the pros!), so be sure to speak with your tax professional or financial advisor before making any big decisions.