The Juice is Worth the Squeeze: Taxes and Homeownership
Editor’s note: We are not tax professionals. This article is for info only. ALWAYS talk to a tax professional about tax benefits, issues or questions.
Taxes are dreaded and unpleasant, if not downright painful, for most people. But there are ways to lessen the annual pain: tax credits and deductions are abundant. From charitable donations to home renovations, to tax credits for your children, dependents and even your business.
I’ve claimed all that were applicable and legitimate. I’ve donated, and I’ve renovated. I’ve added energy efficiency and replaced old with new. I’ve had a home office and even calculated mileage to expense.
One deduction has always championed them all — my home. The simple act of buying and owning a home is – year after year – my biggest, best and most useful tax deduction.
The process may be daunting, but it is front loaded. You put in the work to buy and to finance; then you reap the rewards. Home related deductions are everywhere and, with a reasonable amount of effort, you can lessen your tax burden substantially by simply being aware and choosing the right tax professional.
The Biggest Deduction
Your tax-deductible mortgage interest is the single biggest deduction available to the majority of homeowners. You are taking advantage of it already right?
More Efficient, More Tax Credits
Energy efficiency is a big deal. It benefits the environment and the wallet. Energystar.gov is a fantastic resource for understanding efficiency benefits. Whether from your monthly bills or available tax credits, you will be highly likely to discover savings in multiple forms.
You’ll also get deductions for home efficiency improvements like sealed windows and doors, new heating and air conditioners, a more efficient water heater, attic fans – basically anything that uses less energy to perform the same function as its less efficient predecessor.
You are keeping those receipts from your last run on Best Buy right?
Another Major Deduction
A substantial piece of your monthly loan payment is comprised of taxes headed to an escrow account. Property taxes are another major deduction available for homeowners. If you’re a new to owning a home, as in the first year of ownership, find your settlement statement from closing prior to sitting down at tax time.
A Question of When
When you sell and when you buy are of great importance. Again, if you’re new to owning your own home, the tax payments were likely split between you and the seller, so that you both only pay taxes for that percentage of the year in which you actually legally owned the home.
The homeowner’s share of taxes is fully deductible. It’s often their most significant investment, largest asset, and juiciest tax breaks. These benefits are excellent arguments for home-ownership.