Friday, May 25 , 2018, 4:07 pm | A Few Clouds 66º

 
 
 

Home Sweet Homeownership: Consider These Tax Deductions and Tax Credits

The tax season is looming once again, but as a homeowner you have more to look forward to than to fear. The benefits of and the incentives for owning a home versus renting or leasing are the variety of tax deductions available to you as a homeowner.

Mary Layman
Mary Layman

So as you prepare to do your taxes, keep in mind the avenues and benefits available to you, and be sure to consult your CPA or tax adviser — and if you don’t have one, it is well worth the cost to consult with a knowledgeable financial professional.

It’s important to consider each home tax deduction and credit you are entitled to, as well as to avoid common tax-filing errors. So let’s look at some of the benefits that are available to you.

Property tax: First, be sure to deduct the property tax expense on your return for the year you paid it. Keep in mind that it could be different than the year it was due.

Energy upgrades: Another item to think about is whether you spent money on certain home energy-efficiency upgrades. If you did, there is a tax credit that will work in your favor (not to mention the savings you’ll enjoy on your utility bill after you've installed the energy upgrades). Energy upgrades are also a great way to improve the value of your home when you are ready to sell. From energy efficient windows and doors to kitchen appliances, solar panels and the like, upgrading your home is both good for the environment, a potential money-saver  in your utility bill and an attractive incentive for potential buyers.

Home repairs: If home repairs were conducted, it’s worth noting that you can only claim deductions if part of your home is used for business or casualty losses. Be sure to discuss these types of deductions with a tax adviser so that you stay within IRS-approved guidelines for home office use.

PMI: Also, if you purchased your home with a down payment of less than 20 percent and purchased Private Mortgage Insurance, then 2013 was the last year you will be able to claim the PMI deduction since Congress has allowed it to expire. Just keep in mind there are income limitations, so check with your tax person about whether you qualify for this deduction.

Capital gains: Did you sell your home last year? If you made a profit, don’t forget that may you have to pay capital gains taxes on any profit. However, you can exclude $250,000 (or $500,000 if you’re a married couple) from your taxes, another incentive for homeownership, and for perhaps downsizing and selling your property, and keeping the equity in your pocket. Did you know that you can buy and sell your primary residence every two years and take advantage of this great tax benefit?

MID: And of course there is the mortgage interest tax deduction. Make sure you don’t claim too much for this deduction. You are allowed to deduct home acquisition debt up to $1 million, as well as $100,000 in home equity debt.

Home office: If your home is your primary place of business, then you could be eligible to deduct some of your home expenses, such as utilities and maintenance. Be careful here, however, because the IRS has strict guidelines, and it is important to document use, clearly allotted space separate from your living environment, and expenses.

Casualty losses: While we don’t have as severe weather conditions as might be found throughout the country, such as major snowstorms or rainfalls, we do have our own particular problems: hillside movement, fires, flooding and inadequate infrastructure when we do get the occasional big rainfall. If disaster created property damage and destruction to your home, then you are able to deduct some losses (but be sure to carefully document your deductions with photos, receipts and insurance claim reports). You should consult a tax adviser because filing for casualty losses can be complex, especially since your income and property value can impact the deduction, as well as depreciated values of items.

Remember, there are so many benefits to homeownership, and tax considerations are just a part of it. Call me soon and we can get you on the road to homeownership, or help you downsize and take your property tax basis benefit with you. Feel free to contact me with any questions you might have about other benefits that you can take advantage of and or the value of your home, especially if you are considering selling in this fantastic market.

— Mary Layman is a Realtor with Berkshire Hathaway HomeServices California Properties. She can be reached at [email protected] or 805.448.3890. The opinions expressed are her own.

Support Noozhawk Today

You are an important ally in our mission to deliver clear, objective, high-quality professional news reporting for Santa Barbara, Goleta and the rest of Santa Barbara County. Join the Hawks Club today to help keep Noozhawk soaring.

We offer four membership levels: $5 a month, $10 a month, $25 a month or $1 a week. Payments can be made through PayPal below, or click here for information on recurring credit-card payments.

Thank you for your vital support.

Become a Supporter

Enter your email
Select your membership level
×

Payment Information

You are purchasing:

Payment Method

Pay by Credit Card:

Mastercard, Visa, American Express, Discover

Pay with Apple Pay or Google Pay:

Noozhawk partners with Stripe to provide secure invoicing and payments processing.

  • Ask
  • Vote
  • Investigate
  • Answer

Noozhawk Asks: What’s Your Question?

Welcome to Noozhawk Asks, a new feature in which you ask the questions, you help decide what Noozhawk investigates, and you work with us to find the answers.

Here’s how it works: You share your questions with us in the nearby box. In some cases, we may work with you to find the answers. In others, we may ask you to vote on your top choices to help us narrow the scope. And we’ll be regularly asking you for your feedback on a specific issue or topic.

We also expect to work together with the reader who asked the winning questions to find the answer together. Noozhawk’s objective is to come at questions from a place of curiosity and openness, and we believe a transparent collaboration is the key to achieve it.

The results of our investigation will be published here in this Noozhawk Asks section. Once or twice a month, we plan to do a review of what was asked and answered.

Thanks for asking!

Click Here to Get Started >

Reader Comments

Noozhawk is no longer accepting reader comments on our articles. Click here for the announcement. Readers are instead invited to submit letters to the editor by emailing them to [email protected]. Please provide your full name and community, as well as contact information for verification purposes only.

Daily Noozhawk

Subscribe to Noozhawk's A.M. Report, our free e-Bulletin sent out every day at 4:15 a.m. with Noozhawk's top stories, hand-picked by the editors.

Sign Up Now >