I recently had a client reach out and ask what if any tax breaks they would qualify for if they purchased a home. Given the state of the real estate market, I know many prospective homebuyers are looking right now for any kind of financial cushion.
With that in mind, I thought I would share with you the good news I gave this client: There are a number of tax benefits that come with homeownership. Take a look at a few key ones below.
- You can deduct the interest you pay on your mortgage if the amount is over $600–up to a certain limit.
- You may be able to deduct the amount paid for mortgage insurance.
- You can reduce how much you owe in federal taxes by deducting your state and local real estate taxes by up to $10,000 in 2022.
- When you sell your home, you can exclude part or all of the profit from capital gains tax as long as you lived there for at least two of the past five years.
- People with lower incomes might be eligible for mortgage interest tax credits if issued a qualified Mortgage Credit Certificate from the state or local government.
Improvements to your home can also come with tax benefits. You may be able to get a credit for installing certain types of renewable energy improvements like solar water heaters and heat pumps. And if you need to make modifications to your home for medical reasons, like installing a wheelchair ramp, you may be eligible to deduct those costs as well.
With that said, if you are considering buying a home or doing a considerable remodel, it’s always a good idea to take note of the tax benefits you might qualify for. If that’s in the cards for you, do not hesitate to reach out if you’d like me to take a look at your unique situation–I’d be happy to see how you might be helped by tax breaks.