When you own a home, it is possible to get tax help when it’s time to file your tax return. There are also a few tax-deductible housing expenses that can reduce your income tax liability.
Here are some ways that you can get tax help as a homeowner:
Mortgage Interest
When you have a mortgage loan, you have to pay interest on it (via the interest rate, or mortgage rate). The good news is that there is tax help for if you itemize your tax deductions. This tax help includes a deduction for mortgage interest paid, which can lower your taxable income. [See related article “The Mortgage Interest Tax Deduction”]
Mortgage Points
If you paid mortgage points on a new mortgage or on a refinance, it is possible for you to take a deduction for the points you paid to lower the interest rate. [See related article “Tax Deduction for Mortgage Points”]
Property Taxes
You also get income tax help for the local property taxes you have paid. The taxes you pay to your local government may be deductible on your income tax return. [See related article “Property Tax Relief”]
Home Improvements
The money you spend on home improvements is not directly tax-deductible. However, if you get a home equity loan (HEL) or home equity line of credit (HELOC) to pay for the home improvements, you can get tax help by deducting the interest on that loan.
Moving Expenses
Moving can also provide you with tax help. You can deduct some moving expenses from your income as long as your move meets certain requirements (as set forth by the IRS).
Home Business
If you have a home office, some of the expenses incurred (including a portion of your mortgage payment, utilities, and office supplies) may be tax-deductible as well.
Your housing expenses can result in a tax deduction, which lowers your taxable income, providing you with tax help. Because the amount you pay in taxes is dependent on your income, it can be very helpful to lower your taxable income. If you make $55,000 a year and you have deductions that add up to $13,000, then your taxable income is $42,000. Paying a percentage of $42,000 in tax will come out to less than the same percentage of $55,000. In some cases a tax deduction can even help put you in a lower tax bracket. You might be almost in the 25% tax bracket, but a tax deduction on housing expenses could bring you down to the 15% bracket.
It is a good idea to check with the IRS or a tax preparer for more information about which housing expenses are tax-deductible. You may also consider consulting a knowledgeable tax professional who can help you determine exactly what kind of tax help you are eligible for.