Tax Benefits of Owning Your Own Home

If you’re looking for a new home, you may be weighing the pros and cons of buying versus renting. Each option comes with a variety of considerations, making it important to understand what best suits your lifestyle and financial goals. One of the principal advantages of homeownership is the multitude of tax benefits that come from purchasing and owning a residence. Here are a few key tax benefits you’ll enjoy as a new homeowner.

This article is written for informational purposes only. Specific details and benefits may vary. Please consult your tax professional.

Tax Deductions for Homeowners

Tax deductions are costs that can be subtracted from income, thus lowering the tax bill. Many homeownership costs are tax deductible, reducing the expenses of owning and maintaining a residence.

Property Taxes

Many local and state governments levy an annual property tax to fund community government services. While the total property tax will vary, homeowners can potentially deduct up to $10,000 ($5,000 if married filing separately) on their local / state tax bill.

Mortgage Interest 

To make owning a home more attainable, homeowners can deduct home mortgage loan interest. Deduction amounts will vary depending on the mortgage and the home’s purchase date.

Home Office Expenses

Self-employed business owners who use their home as their primary place of business can deduct certain expenses — such as mortgage interest, utilities, and insurance — from their taxes. This will vary depending on the size of the home office among other factors, but it is a notable benefit for self-employed homeowners.

Medically Necessary Home Improvements 

Many home improvements or changes to accommodate a medical condition are tax deductible. Costs incurred by widening doorways, installing support bars, adding ramps, and more can be used to lower your tax bill. Installation, maintenance, and operating costs of medically-necessary equipment may also be a potential tax deduction for homeowners.

Home Equity Debt Interest

Homeowners who want to improve or upgrade their home using a home equity loan can deduct interest paid on that loan from their taxes. This deduction provides homeowners the ability to create their dream home without taking on a large financial burden.

Tax Credits for Homeowners

While tax deductions are costs that lower taxable income, tax credits are amounts that reduce taxes owed. This could mean a decreased tax bill or a higher potential refund.

Renewable Energy Tax Credits 

By adding renewable energy systems in the primary home, homeowners can take advantage of multiple tax credits. Eligible upgrades include clean energy equipment, such as rooftop solar systems, battery storage technology, or energy-efficient upgrades, like insulation, HVAC, or windows.

Mortgage Credit Certificate 

First-time homebuyers may qualify for the Mortgage Credit Certificate program. Created to help lower-income families purchase a home, qualified homebuyers can claim a dollar-for-dollar tax credit for up to $2,000 of their mortgage interest.

Purchasing a home is a big investment, but with the multiple tax benefits available, achieving homeownership is more attainable than ever. At Blue Mountain Communities, we’re here to guide you throughout the homebuying process, from connecting you to our preferred lenders to finding a home that fits your lifestyle.