Did you know the benefits of homeownership extend to tax season? Federal tax deductions may add up to significant savings every year. Take a look at a few ways you may be able to save during tax season: As always consult with your tax advisor to explore what is best for your individual situation.
- Interest and property tax. Mortgage interest is a big part of your house payment, and the good news is (in most cases) the total amount of interest you pay on the loan is fully deductible. Property taxes you pay to state or local municipalities are generally deductible. One thing to note: In 2017, adjustments made to tax laws change deductions for homeowners with large loans. In short, if you buy a home for more than $750,000, you can only deduct mortgage interest up to a loan amount of $750,000. If you closed on your mortgage before Dec. 15, 2017, you can still collect deductions on a loan up to $1 million.
- Home Equity interest. New tax law changes recently took away the interest deduction for Home Equity loan interest. If you have a home equity loan, this may be a good time to explore if it makes sense to refinance all your mortgage debt into a traditional mortgage.
- January mortgage payment made in December. Did you know that if you make your January mortgage payment in December the interest paid from the January payment can be deducted in the year in which the payment was made. This could increase your mortgage interest deduction.
- Points. If you pay points to get a better interest rate on your home loan, you may be able to deduct the amount on your taxes the year you purchase the home. If you're refinancing, the deduction is typically divided over the life of the loan.
- Capital Gains. Capital gains or profits on the sale of your home are tax-free up to $250,000 for individuals ($500,000 for married couples). To enjoy this benefit, you must have lived in the home as your primary residence for at least two of the last five years.