Homeownership is a dream of many for various reasons: comfort, security, and a place to personalize and make their own. While these are all great benefits of purchasing and owning a home, there are recurring costs associated with owning a property. Thankfully, there are tax benefits available that may help offset these costs.

Every homeowner’s experience is different, and eligibility for these benefits can vary based on individual circumstances. These are some potential tax benefits that may apply. Remember, your Helen Adams Realty agent is available to help you understand the costs of homeownership and how to take advantage of any tax benefits that may be applicable. 

Keep Records

When it comes to any home expenses, it’s best to keep adequate records. Some tax benefits require homeowners to itemize deductions instead of taking standardized deductions. Keep organized records throughout the year to ensure a smooth tax season and help ensure you don’t miss eligible deductions.

Real Estate Taxes

Many people take out a mortgage to purchase a home, which is a predetermined amount paid monthly over the life of the loan. Other home purchase expenses, like closing costs and property taxes, may be included with the mortgage amount. 

Homeowners who itemize may deduct the cost of state and local real estate taxes paid toward the mortgage in a given year. The maximum combined amount to be deducted is $10,000. 

Mortgage Interest

Deductions may be taken for interest paid on a home’s mortgage. Homeowners who itemize may deduct 100% of their mortgage interest payments with a maximum combined mortgage balance of up to $750,000 (this applies exclusively to loan balances taken after Dec. 16, 2017). 

Capital Gains

When selling a home, many homeowners can take advantage of savings opportunities when they aren’t required to pay capital gains tax on profits from the home’s sale. One key requirement to avoid capital gains tax is owning and occupying the home as a primary residence for at least two of the past five years. In this case, seller(s) do not have to pay any taxes on the first $250,000 (filing single) or $500,000 in profits (filing married). This rule typically applies to primary residences, not investment properties.

Please note that tax law is changing regularly. Refer to your real estate agent and qualified tax professional for the most current and personalized information.