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Fiscal Cheer: Tax Advantages to Consider Before the New Year
No one likes to think about taxes, but before you know it, April 15 will roll around, and you don't want to let it sneak up on you without considering how to minimize your tax liability by taking advantage of all eligible deductions. Our team of professionals does more than offer Edina homes for sale and Glenwood homes for sale. We also want to point out some of the many tax benefits of homeownership. Before your tax professional can advise you to take the standard deduction or itemize, you will need to provide the documentation for these important deductions.
- Mortgage Interest
For any mortgage you took out before December 15, 2017, you can deduct 100% of the interest you paid in 2023 up to a one-million-dollar limit. For a mortgage you took out after that date, the limit is $750 thousand. - Home Equity Loans
If you borrowed against the equity you have built up in your home, either as a standard loan or with a line of credit from a HELOC, you can deduct the interest for loans used for home renovations and repairs. This caveat was not in place before 2017. - Property Taxes
If you purchased your home in 2023, you may have reimbursed the seller for taxes paid this year. Check the settlement sheet for this information. You will not receive a 1098 report listing them. The deduction for state and local taxes, including property taxes, is limited to $10,000 annually. - Points Paid at the Time of Purchase
Mortgage points prepay interest in exchange for lower interest rates and monthly payments. Your agent may have referred to them as a buy-down of your interest rate. A point is equal to one percent of the total loan amount. If you paid points as a portion of your closing costs, that dollar amount is deductible from your taxes to reduce your liability. - Home Improvements Made for Medical Care
These deductions fall under the "Other medical and dental expenses" line of your tax return. The deductible amount is only that which exceeds 7.5% of your adjusted gross income. - Home Office Deduction
Some homeowners run a business from the house, and the IRS allows them to take a deduction for that. It is important to realize this is not available to employees who work from home. To qualify for the deduction, the space must be used exclusively and regularly for the business. There are two ways to calculate the deduction. One method considers all of the expenses related to the house and takes a percentage of it. There is also a simplified version, which is a flat $5 per square foot to a maximum of $1,500 annually.
If these and other deductions total more than $12,950 for single filers, $25,900 for joint returns, or $19,400 for heads of households, your tax preparer will recommend that you itemize your taxes. Note that figures are for tax year 2022, and they are adjusted annually for inflation. As you can see, careful record-keeping is important to the process. We recommend you contact a tax professional before filing.
If you are in the market for a new home, remember these added financial benefits, and call today to let us help you find your perfect space.