Owning a home can get expensive, but it’s nice to know that you may be able to write some of those expenses off on your taxes. Although the tax laws are a little different this year, you may still be eligible to deduct some of the expenses that you pay for your home.
The largest issue this year is whether or not you’ll be able to itemize your deductions. The standard deduction went up significantly this year. A single person can take a standard deduction of $12,000 and a married couple filing jointly can deduct $24,000. This is much more than what many people write off each year, making it unnecessary to itemize deductions.
Assuming you qualify to itemize your deductions, keep reading to learn which homeowner’s expenses you can deduct.
The Interest You Pay
One of the largest things you can write off is the interest you pay on your mortgage. You have to be careful here, though. You can’t write off the interest on just any mortgage. You may only deduct the interest on your primary residence or the interest on a second home. If you pay interest on an investment property, you cannot deduct it.
If you have a second mortgage, you may be able to deduct the interest if you took the loan to make improvements to the home. If you took the second mortgage for any reason that doesn’t pertain to the home, you cannot deduct the interest.
The Taxes You Pay
Another large deduction you may be able to take is the real estate taxes that you pay. Whether you pay your taxes via an escrow account or you handle the payments yourself, you can write the taxes off in the year that you pay them. Just like mortgage interest, though, you are limited on which taxes you can write off on your taxes. In this case, you can only deduct the real estate taxes that you pay on your primary residence.
The Points Paid on Your Mortgage
If you just took out a mortgage this year and the lender charged you points, you may be able to deduct them. Typically, most borrowers can deduct all of the points that they pay, but there is the rare exception. If you paid an exceptional amount of points on your mortgage, you won’t be able to deduct all of them. It depends on the amount of points that are ‘usual and customary’ for the area that you live. As long as you pay around what everyone else pays, you should be able to deduct the points.
Homeowner Expenses You Can’t Deduct
Unfortunately, there are many more homeowner’s expenses that you will likely pay and you won’t be able to deduct them. They include the following:
- Homeowner’s insurance premiums
- Flood insurance premiums
- Extra payments towards your principal
- Home repairs
- Home maintenance
- Mortgage insurance
- Casualty and theft losses
Typically, you also cannot deduct the cost of a home office, but if you are a business owner running a business out of your home, you may be able to deduct it. If you do take this deduction, you’ll have to prorate the deduction for your mortgage interest and real estate taxes to exclude the home office as it will become a part of that deduction as well.
If you are going to itemize your deductions this year, it’s best if you get the help of a tax professional. This way you will know which deductions you can take and which you shouldn’t take. Whether you take the standard deduction or you itemize your deductions, though, you’ll be able to save yourself some money on your tax liability.