Homeowner Tax Benefits: Deductions and Credits
Homeownership comes with a number of tax benefits that can reduce the amount of tax owed or increase the amount of money returned in the form of a tax refund. In this article, we will discuss two common types of homeowner tax benefits: deductions and credits.
Deductions for Homeowners
A tax deduction reduces the amount of taxable income a person must report on their tax return. Some common homeowner deductions include:
• Mortgage interest
• Property taxes
• Certain home improvements
• Points paid to obtain a mortgage
• Mortgage insurance premium
• Casualty losses
• Home office expenses
It’s important to keep in mind that these deductions may have limits and restrictions, and the rules can change from year to year. It’s always best to consult a tax professional to determine your eligibility and the specific deductions you can claim.
Tax Credits for Homeowners
A tax credit directly reduces the amount of tax a person owes. Some tax credits available to homeowners include:
• Energy-efficient home improvements
• First-time homebuyer credit
• Homeowner credit for mortgage interest
• Tax credits for the disabled and elderly
• Property tax credits
It’s important to keep in mind that these credits may have limits and restrictions, and the rules can change from year to year. It’s always best to consult a tax professional to determine your eligibility and the specific credits you can claim.
Difference Between a Tax Credit and Deduction
A tax credit and a tax deduction are two different types of tax benefits that can reduce the amount of tax a person owes. A tax deduction reduces the amount of taxable income a person must report on their tax return, while a tax credit directly reduces the amount of tax owed. Tax credits are typically more valuable than tax deductions because they reduce tax liability dollar-for-dollar.
In conclusion, homeownership offers a number of tax benefits in the form of deductions and credits that can reduce the amount of tax owed or increase the amount of money returned in the form of a tax refund. To determine your eligibility for these benefits and the specific deductions and credits you can claim, it’s always best to consult a tax professional.
Reference:
https://www.irs.gov/credits-deductions-for-individuals
https://www.kiplinger.com/taxes/income-tax/603276/tax-breaks-for-homeowners-and-home-buyers
https://www.tax.ny.gov/help/taxpayer-education/tax-basics-new-homeowners.htm