Many homeowners look for tax credits and deductions when it comes to paying taxes each year. Thankfully, there are numerous tax breaks available to homeowners that could total several thousand dollars.
All the Homeowner Tax Credits and Deductions for Your 2022 Tax Return (Photo by Getty)
Although owning a home may be the American ideal, it is certainly not inexpensive. According to the home services company Angi, the average US homeowner spent $12,904 on repairs, maintenance, and emergencies in 2022 in addition to their mortgage and property taxes.
However, there is a silver lining to all of those costs: tax credits and deductions for your house that could result in a larger tax refund. For homeowners, maximizing your tax refund when you file your income tax return can be achieved by understanding as much as you can about your possible tax benefits.
The majority of mortgage holders are aware that they can deduct payments made toward their loan interest, but many other tax breaks and credits related to property ownership are less clear. To receive the largest tax refund possible in 2022, learn about all the various tax reductions for homeowners.
8 Tax Deductions For Homeowners: Your Breaks And Benefits (Photo via www.rocketmortgage.com)
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It is crucial to comprehend the distinction between standard and itemized deductions before delving into the tax benefits accessible to homeowners. By lowering your taxable income, these forms of deductions can reduce your general income taxes.
How do tax rebates for homeowners operate?
All taxpayers have access to the standard deduction according to the Internal Revenue Service (IRS).
The standard deduction for single and married people filing separate tax returns is $12,550.
The standard deduction for married couples filing jointly is $25,100.
The standard deduction for the head of the family is $18,800.
You must itemize your deductions on Form 1040 Schedule A to be eligible for homeowner tax deductions; whether to itemize depends on whether your itemized deductions exceed your standard deduction. You can easily decide whether to itemize using the best tax software as well as help you fill out all of the tax forms.
You are not required to itemize when claiming homeowner tax credits. You can typically receive those credits whether or whether you itemize deductions because they immediately lower the amount of taxes you owe.
Homeowner Tax Exemptions: Tax credits and deductions for your 2022 tax return (Lapresse)
The largest tax deduction available to homeowners is for mortgage interest.
One of the most popular tax deductions for homeowners is the amount of mortgage interest, or the annual interest you pay on your mortgage. Especially for first-time homebuyers, whose payments often go more toward loan interest during the initial years of a mortgage, it is frequently the most profitable.
When filing jointly, homeowners can deduct all mortgage interest payments on loans up to $1 million, or up to $750,000 if they were made after December 15, 2017. Individuals who file as singles receive half of those sums ($500,000 or $375,000, respectively).
You must complete IRS Form 1098, which you should get from your lender in early 2023, in order to deduct your mortgage interest. The amount from Line 1 of that Form 1098 can then be entered into Line 8 of Schedule A of Form 1040.
Mortgage points are tax deductible.
When purchasing a home, you can purchase mortgage points, also known as “discount points,” to lower the rate on the mortgage. Homebuyers’ interest rates typically decrease by 0.25% for every 1% of the mortgage amount they pay above and above their down payment, though the exact amount will vary depending on the lender and the loan.
Discount points can help you save a lot of money on a 30-year mortgage by reducing the total interest you’ll have to pay over the course of the loan, but they can also help you save money when it comes to taxes. Mortgage points are treated as prepaid interest by the IRS, therefore you can include the cost of points in the total amount of mortgage interest reported on Line 8 of Schedule A of Form 1040.
Property taxes are deductible, but only up to a certain amount.
You can deduct local and state property taxes from your taxes, also known as real estate taxes, but at a much lower rate than before 2017.
Property taxes plus state and local income taxes can only be written off for a total of $10,000 thanks to the Tax Cuts and Jobs Act of 2017. Your whole property tax payment was deductible before 2017.
You must keep track of your annual property tax payments in order to claim your deduction for property taxes. Box 10 on Form 1098 from your mortgage lender may also provide information about your real estate taxes. Line 5b of Schedule A of Form 1040 should provide the entire amount of real estate taxes paid for the year.
30% of the cost of installing an electric car charging station can be refunded.
Charge points for electric vehicles may allow you to receive a tax refund. The highest credit you can receive for installing an alternative energy charging station in your house is $1,000, or 30% of the cost (whichever is smaller). To claim your tax credit for the money spent on clean energy installation, complete IRS Form 8911.
Which costs related to a home are not tax deductible?
There are some home-related expenses that you cannot deduct from your income, despite the fact that homeowners are eligible for many tax incentives.
- Your mortgage’s down payment.
- Any payments made on a mortgage toward the loan principle.
- Cost of utilities such as gas, electricity, and water.
- Homeowner’s or fire insurance.
- Maintaining the grass or cleaning the house.
- Any decrease in the value of your house.
Everybody has a different tax position. We advise speaking with a tax expert who is knowledgeable about both federal and state tax rules before making any significant tax decisions.
