Homeowner Tax Deductions Parkland Owners May Not Know About
Housing cost tax deductions are some of the most beneficial and provide some of the largest relief from tax responsibilities in the United States. When it comes to filing taxes many homeowners in Parkland and all across the country may be unaware of tax benefits beyond the well-known standard mortgage write-off.
It is within every Parkland homeowner's best interest to make sure they are well aware of every text deduction available to them through their home ownership. It can help you to save a significant chunk of money on your tax return.
Here are some homeowner tax benefits many homeowners are not aware of
Mortgage points are deductible not just interest
As mortgage interest rates began to climb some homeowners found themselves purchasing mortgage points to help keep their monthly mortgage payments low. If you are a Parkland homeowner that took advantage of purchasing mortgage points you can deduct this on your tax return.
The Internal Revenue Service also more commonly known as the IRS looks at purchased mortgage points as prepaid interest on your mortgage loan. Homeowners can add the total amount they purchased points for to their mortgage interest entered into Line 8 of 1040 Schedule A on the tax form.
Big savings for new homeowners with a mortgage credit certificate
If you are a Parkland homeowner that has received a mortgage credit certificate from the state or local government there are big tax credit savings for you. Often these certificates are supplied through your mortgage lender. Homeowners with a certificate can get a percentage of their mortgage interest payments back as a tax credit the rate varies by state but here in Florida, it is a significant 30%.
It is good to know that this money can only be used against taxes that are owed. If the taxpayer does not owe any federal taxes then the credit will not be applied. This is most beneficial for first-time homeowners. What is nice is that a first-time homeowner is defined as someone who has not owned a primary residence in the last three years. This credit can be filed with IRS form 8396.
Deducting property taxes
Some homeowners may be aware of this but few people look into actually using this credit. This is probably because post-2017 the credit significantly lowered. The Tax Cuts and Jobs Act of 2017 only allows a deduction of up to $10,000 combined from property taxes and state and local income taxes. Prior to this, the entire amount was deductible.
Taxpayers will be required to track annual property tax payments. The deduction can be found in box 10 of form 1098 supplied by your mortgage lender. Taxpayers can enter the total amount of taxes paid for the year in line 5b of the 1040 schedule A.
If you sold your primary residence
If you sold a home last year the tax man will require you to pay taxes on the profit you gain from the sale. This is referred to as capital gains tax. There is a way around this tax if you live in a home for two of the previous five years before you sold you can use a tax exclusion of up to $500,000 for taxpayers that are married and filing jointly for $250,000 for single taxpayers.
This benefit is nice as it can be applied by any taxpayer regardless of age or how many times they have used the benefit in the past. You can find the information for reporting this on a 1099–S form. Taxpayers will be required to report the ultimate gain from the sale excluding the applicable $500,000 or $250,000 amount. This will need to be reported on form 8949.
If you have made home improvements for medical needs
Any home improvements or remodeling to your home to help make living in place possible for health needs can be deducted. This is however only possible if the expenses have gone above 7.5% of your adjusted gross income or taxable income. These improvements can include anything from making wider doorways to accommodate walkers and wheelchairs, to safety bars, lifts, ramps, and other things of the like.
For this deduction, you want to keep all of your receipts and invoices handy and total the entire cost of the improvements along with all medical and dental expenses. This can be reported on line one of 1040 schedule A.
These are just a few of the homeowner benefit tax deductions available. It is good to note that we are not tax professionals and the best way to maximize your eligible tax savings for both home ownership expenses and everything else is to discuss your personal finances with a tax professional.
For more information on real estate in Parkland Florida please contact us anytime.