Did you know that paying money to own a home can actually save you money? This April 15, take advantage of these tax benefits and reap your homeowner rewards for the rest of the year.
- Reduce the interest on your mortgage
No longer do mortgage payments have to be a burden. Now you can take advantage of those homeowner fees and deduct them from your taxes. The more you pay on your mortgage now, the more you’ll save when April rolls around.
If you’ve taken out a mortgage recently, you’re in even more luck. Because early mortgage payments are mostly all interest, you can claim a deduction for these interest payments and save on your taxes.
- Deduct your property taxes
With deductible property taxes comes hefty savings. The average household property tax is $2,127, according to the U.S. Census Bureau. This can either be deducted from your monthly payment on your mortgage, or by writing off the payment after paying your property taxes off early.
Something important to note: you must claim the tax deduction in the same year you write the check. For more details, check out how to calculate property taxes.
- Insurance on your private mortgage
You might be paying private mortgage insurance if you initially paid less than 20% for your home. You can deduct the small percentage of interest on this insurance from your annual income and pay less in taxes.
For example, if you make $100,000 and put down 5% on a $200,000 house, you’ll pay about $1,500 in annual PMI premiums and thus cut taxable income by $1,500.
- Putting “green” updates in your home puts more “green” in your wallet
For any equipment you’ve updated in your home that uses renewable energy sources, you can claim up to 30% of the installation costs from The Renewable Energy Efficiency Property Credit.
Upgrades such as wind turbines, solar panels, HVAC systems, energy-efficient windows, and storm doors could help you earn a tax credit of up to $500. While some of the credit for these updates might have expired in 2016, the credit for installing solar panels runs until 2019, so hurry and take advantage of these extra “green” savings.
- Stay in – work from home
Working in your pajamas never had so many benefits. By claiming your “office space” at home, you can take a $5-per-square-foot deduction off your annual taxes, for up to 300 sq./ft. of office space. Check with your accountant to make sure you fulfill all the requirements before taking advantage of this money-saving opportunity.
- Age in place
By renovating your home to make it more accessible as an older homeowner, you could save on your taxes this year. Wheelchair ramps and grab bars in bathrooms are two updates that could help you save big.
Jayson Mullin, owner of Top Tax Defenders, says “You can deduct the amount by which the cost of the improvements exceeds the increase in your home’s value.” If you spend $5000 installing a wheelchair-accessible ramp in your home, and it increases the value of your home by $3,000, the end deduction you could claim would be $2,000.
The only catch is the renovations must cost more than 10% of your AGI, unless you or your spouse are 65 or older, then the cost must only exceed 7.5% of your AGI.
- Take advantage of your HELOC
Deduct the interest you pay on your home equity line by spending it on repairs and renovations for your home. The bigger the loan you take out, the more you can save later on your taxes. So this year, upgrade your home and you might reap big financial benefits.