{"id":26462,"date":"2023-06-19T10:14:34","date_gmt":"2023-06-19T17:14:34","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=26462"},"modified":"2023-07-14T20:21:10","modified_gmt":"2023-07-15T03:21:10","slug":"buyer-tax-breaks-for-buying-a-house","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-tax-breaks-for-buying-a-house\/","title":{"rendered":"Tax Breaks for Buying a House: 13 Tax-Savings Opportunities You Might Be Able to Claim"},"content":{"rendered":"

You probably know that homeownership comes with tax-savings opportunities. But if you hopped into the real estate market for the first time<\/a> this year (congratulations!), then you might not be familiar with all the specifics.\u00a0Or maybe you\u2019ve owned a home before, but it\u2019s been a while since you dug into the tax ramifications in that first year after buying \u2014 and the tax law is constantly changing. So what kind of tax breaks for buying a house<\/a> can you get these days?<\/p>\n

We found 14 possibilities \u2014 from deductions to credits to other potential savings opportunities you might not have even considered. Read on!<\/p>\n

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Step one: Talk to a few buyer's agents!<\/h3>\n

Tell us a little bit about your plans (where you’re looking to buy and when you want to make a purchase) and we’ll connect you with top-rated buyer’s agents in your area. It takes only a few minutes, and it’s free.<\/p>\n \n

\n Get Started<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n<\/span><\/p>\n

Deductions<\/h2>\n

A tax deduction is a line item that reduces your adjusted gross income, which has the result of reducing your taxable income. Let\u2019s go through some of these available to homebuyers and homeowners.<\/p>\n

Mortgage interest<\/a> deduction<\/h3>\n

Before the Tax Cuts and Jobs Act, homeowners could deduct interest on up to $1 million in mortgage debt if married and filing jointly, or $500,000 if single or married and filing separately. If you bought your home between October 13, 1987, and December 16, 2017, you can still take advantage of this higher limit. If you purchased your home after December 16, 2017, the new legislation<\/a> lowered this limit to $750,000 for married tax filers or $375,000 for those single or married and filing separately.<\/p>\n

\u201cAlthough buying a house can be quite scary for many, it\u2019s actually a key to several nice tax breaks,\u201d says Dmytro Serhiiev, a professional tax specialist at PDFLiner<\/a>. \u201cThe super-great news is that your mortgage interest payments and even late fees (sometimes) are deductible.<\/p>\n

\u201cYour lender must send you the IRS Form 1098<\/a> after the end of every tax year. You can find the amount of interest you paid in that form. Make sure to include the amount in your tax return to request deduction.\u201d<\/p>\n

Real estate tax deduction<\/h3>\n

Most homeowners can take a real estate tax deduction<\/a>; the Internal Revenue Service (IRS) allows deductions for real estate taxes on homes and rental properties. Make sure you deduct the property tax in the year you pay it.<\/p>\n

\u200b\u200bMortgage points<\/a> deduction<\/h3>\n

Typically, the IRS allows homeowners to deduct the full amount of their mortgage points<\/a> in the same year that homeowners pay them.<\/p>\n

If the amount you borrow to buy your home exceeds $750,000 (or $1 million for mortgages originated before December 15, 2017), the number of deductible points is typically limited<\/a>.<\/p>\n

\u200bHome office deduction for self-employed<\/h3>\n

If you are self-employed, you may be able to deduct the space you use as an office within your home.<\/p>\n

To be eligible for the home office tax deduction<\/a>, you\u2019ll need to be a self-employed business owner or a freelancer. You\u2019re unlikely to qualify as a W-2 employee earning a paycheck from an employer. (So, no \u2014 telecommuting instead of going into the office these days doesn\u2019t make you eligible.)<\/p>\n

You must also use the space primarily for the regular use of your business.<\/p>\n

Deductions for certain home improvements<\/h3>\n

If you take out a home equity line of credit<\/a> (HELOC) to pay for a remodel, you can deduct interest you pay on that loan \u2014 as long as you use the money to buy, build, or substantially improve the property.<\/p>\n

These improvements must add value to the home, prolong its livability, or adapt it to a different use. Think roof replacement or building an addition that enlarges the home (but you can\u2019t deduct a new coat of paint alone).<\/p>\n

Medically necessary home improvements<\/a> also qualify here. You can claim expenses that exceed 7.5% of your adjusted gross income (as with other medical expenses) for such requirements as widening hallways and doors, or installing ramps for wheelchair accessibility for a family member.<\/p>\n

Home sales proceeds deductions<\/h3>\n

Home sale proceeds are considered capital gains. But most homeowners won\u2019t have to pay capital gains taxes on the full amount when selling their primary residence, which makes you eligible to exclude capital gains<\/a> (recognized on the sale for the first $250,000 for single filers or up to $500,000 for married couples filing jointly).<\/p>\n

You can also deduct costs associated with selling the home<\/a>, such as escrow fees, the cost of advertising the property, or even the cost to stage it.<\/p>\n

Rental expenses\/depreciation if you rent part of your house<\/h3>\n

If you regularly rent out part of your home \u2014 or even do it for a portion of the year, say when you go on an extended vacation \u2014 you can deduct certain expenses<\/a> to help offset the income you bring in this way. Expenses like mortgage interest, insurance, utilities, real estate taxes, and the cost of maintenance are all eligible deductions.<\/p>\n

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Find a top real estate agent near you<\/h3>\n

We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs. It takes just two minutes to match you with the best real estate agents, who will contact you and guide you through the process.<\/p>\n \n

\n Get Started<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n<\/span><\/p>\n

Credits<\/h2>\n

A tax credit is an amount taken off of your tax bill. For example, if you get a $1,000 tax credit, your tax bill due will shrink by $1,000 \u2014 it\u2019s a dollar-for-dollar reduction in the taxes you owe.<\/p>\n

Mortgage credit certificates<\/a> (MCC)<\/h3>\n

The MCC program was designed to help lower\u2010income buyers get into homeownership: It\u2019s a dollar-for-dollar tax credit to recipients. It can even help borrowers get a loan who might not otherwise qualify by reducing their net monthly mortgage payment.<\/p>\n

To be eligible, you must be a first\u2010time homebuyer, meet the program’s income and purchase price restrictions, and use your home as your primary residence.<\/p>\n

Energy credits<\/h3>\n

The Residential Clean Energy Credit<\/a> can benefit homeowners who make qualifying improvements to their homes.<\/p>\n

\u201cThis credit allows for a credit equal to the applicable percent of the cost of qualified property,\u201d explains Josh Zimmelman, managing director of Westwood Tax & Consulting<\/a> in Rockville Centre, New York.<\/p>\n

Qualifying properties<\/a> include:<\/p>\n