As a homeowner, you have access to several tax deductions that can significantly reduce your tax liability. With the right strategies, you can maximize your tax savings for 2024. Whether it's mortgage interest, property taxes, or energy-efficient home improvements, knowing what deductions to claim can make a big difference come tax time.
Here’s a comprehensive guide on how homeowners can maximize their tax deductions in 2024.
One of the most significant tax deductions available to homeowners is the mortgage interest deduction. If you’re paying interest on a mortgage of up to $750,000 (or $1 million if the loan originated before December 16, 2017), you can deduct the interest paid throughout the year.
Who qualifies? Homeowners who itemize their deductions on their federal tax return and have a qualifying mortgage.
How it works: The deduction reduces the taxable income by the amount of interest you paid on your mortgage, providing a substantial tax benefit, especially in the early years of your mortgage when interest payments are highest.
Another valuable deduction for homeowners is the property tax deduction. In 2024, you can deduct state and local property taxes paid on your primary and secondary residences, up to a limit of $10,000.
Who qualifies? Homeowners who itemize deductions and have paid property taxes on their homes.
How it works: This deduction reduces your taxable income by the amount of property taxes you’ve paid, up to the $10,000 cap set by the Tax Cuts and Jobs Act (TCJA).
With more people working remotely, the home office deduction is becoming increasingly popular. If you use a portion of your home exclusively for business purposes, you may be able to deduct related expenses.
Who qualifies? Self-employed individuals or business owners who use part of their home as their principal place of business.
How it works: You can deduct a portion of your home expenses, such as utilities, mortgage interest, and repairs, based on the square footage of your home office compared to the total area of your home.
The Federal government encourages homeowners to make energy-efficient improvements by offering tax credits and deductions. In 2024, homeowners can claim credits for installing solar panels, energy-efficient windows, and other eco-friendly upgrades.
Who qualifies? Homeowners who install eligible energy-efficient improvements.
How it works: The Residential Clean Energy Credit allows you to deduct up to 30% of the cost of qualifying energy-efficient home upgrades, such as solar panels, energy-efficient heating systems, and energy-efficient windows.
If you paid discount points when securing your mortgage to lower your interest rate, you may be eligible to deduct the cost of those points.
Who qualifies? Homeowners who paid points during the mortgage process and meet IRS criteria.
How it works: If the points were paid to reduce your mortgage interest rate, you can deduct the cost in the year they were paid or spread the deduction over the life of the loan.
Homeowners paying private mortgage insurance (PMI) on their home loans may be able to deduct these payments as part of their itemized deductions. This deduction was reinstated for 2024 and is a valuable tax break for those who don’t have 20% equity in their home.
Who qualifies? Homeowners who pay PMI on a mortgage and meet income limits.
How it works: The PMI deduction allows you to reduce your taxable income by the amount you paid in mortgage insurance premiums during the year, potentially saving you hundreds of dollars.
If you’ve made modifications to your home for medical reasons, such as installing ramps or widening doorways, you may be eligible for a deduction. These medical home improvements must be made to accommodate a medical condition and must not increase the value of your home.
Who qualifies? Homeowners who have made home improvements due to medical needs, with related expenses exceeding 7.5% of their adjusted gross income.
How it works: You can deduct the cost of the improvement as a medical expense, but only the amount that does not increase the value of the home is deductible.
Maximizing your homeowner tax deductions in 2024 can save you a substantial amount of money, but it’s essential to stay informed about what you qualify for. From mortgage interest and property taxes to energy-efficient upgrades and medical home improvements, there are numerous ways to reduce your taxable income. At Homelend Mortgage, we’re here to guide you through the homeownership journey and help you take full advantage of all available tax benefits. Consult with a tax advisor to ensure you’re getting the most out of your deductions this year.
Disclaimer:
The information provided is for educational purposes only and does not constitute financial or tax advice. Please consult with a tax professional for guidance tailored to your specific situation.