Tips for Saving Money on Your Taxes
It’s no secret that we are all experiencing higher costs and the impact of rising inflation on our pocketbooks. The good news is that the recent Inflation Reduction Act includes some adjustments that can help taxpayers save more money for the 2023 tax year.
You’ll be able to keep more of your income with the new tax rate schedules, which raise the income thresholds for tax brackets. And since the IRS also increased the standard deduction for married couples and those filing individually, which is the largest adjustment to deductions since 1985.
We are real estate agents and not CPAs, so why are we talking about taxes? Good question! It’s because you should know about the tax advantages of becoming a homeowner — and stay abreast of any recent tax changes that can impact you.
Homeowner Tax Breaks
Being a homeowner can help you save even more on your taxes and help you keep even more of your hard-earned income. Whether it’s deductions or tax credits, you could keep more money in your pocket when you own a home.
Let’s look at some of the general tax perks you could benefit from as a homeowner. Of course, you want to consult with your own tax advisor for personal tax advice before doing anything.
Mortgage interest. Interest paid on home loans is deductible up to $750,000 for a principal residence plus a second home. This can mean up to hundreds, maybe even thousands of dollars in tax savings to you every year. Ask a tax advisor what that savings could be for you, since everyone will be different depending on factors like your tax bracket, your mortgage amount, etc.
Property taxes. Property taxes on all real estate are fully deductible. That means even more tax savings and even more money you could keep in your pocket.
Credit for “green” improvements. Not a tax break but a credit. Allows homeowners to take up to $500 off their federal income tax for making certain improvements that increase the energy efficiency of their homes, such as water heaters, furnace, heat pump, windows, or roofing. Right now, this tax credit is approved through 2023 only.
Investment Property/Rental Property. The cost of maintaining and marketing a rental property can be deducted from the income the property generates, without regard to the owner’s tax status. These expenses include mortgage interest payments, insurance, utilities, maintenance, repairs, advertising costs and management fees, as well as the non-cash cost of depreciation.
Home office. You can deduct the costs of a home office that you use exclusively as your principal place of business. Since many of you may have started working from home in recent years, make sure you know the specifics to get any deductions.
Tax-free rental income. If you rent out your own home for 14 or fewer days during the year, the rental income is tax-free.
As you can see, there are several ways you can save on your taxes and reap the benefits of homeownership.
We’re Here to Help
Never hesitate to reach out to our team with any questions when it comes to buying a home or becoming a homeowner.
If you or anyone you know is thinking about buying a home, we'd love to help. Our team members like to start with a get-to-know-you conversation and to walk through the entire process of buying a home well before we start looking at homes. Then you’re all set with a strategy that works for your situation.
And if you’d like to know more about how being a homeowner can help you tax-wise, we always recommend reaching out to your Certified Public Accountant or reaching out to our team — we can recommend someone to help you with those estimates and questions.
