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Tax Incentives for Homeowners

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We all know buying and owning a house is expensive. But many first-time homeowners (or soon-to-be homeowners) don’t realize all the ways they can save. Even if it’s not tax season, it’s great to keep in mind all the tax incentives for homeowners that exist.

Property Tax Deductions

Property taxes can cost homeowners an arm and a leg. Fortunately, you can deduct up to $10,000 in property taxes on your return or, if you’re married but filing separately, up to $5,000. This includes the potential to deduct on multiple properties, such as vacation homes, land, and in some instances, even RVs!

One thing to keep in mind: you can only deduct on property taxes you’ve already paid.

Working From Home

There are a number of ways you can save if you work from home. In-home daycare providers, self-employed freelancers or independent contractors, and even those who rent out a room for others can all benefit from this tax deduction! 

Here are some important things to note:

  • For home offices, you can only deduct if you use this part of your house exclusively, regularly, and as a primary place of business.
  • You’ll need to record any expenses that went towards maintaining the office space throughout the year.
  • If you’re working from home for another company, this tax incentive for homeowners does not apply to you.

Read up on Publication 587 for all the details.

Home Equity Loan Interest

Took out a home equity loan this year? You can deduct the interest as long as the loan was used appropriately. In other words, as long as it was used to improve your home. If the loan wasn’t used for those exact purposes, that interest can’t be deducted.

Mortgage Interest

Depending on when you bought your home (only works for homes bought after 12/15/2017) and how much you borrowed, there’s a good chance the you can write off some of your mortgage interest. Use NerdWallet’s mortgage interest deduction calculator to see how much you can save.

Renewable Energy

Have you made the switch to solar panels this year? Good for you. The other great news is that renewable energy earns you a huge tax deduction. You can deduct 26% of your installation costs for solar panels.

Do some research into other tax breaks as well — there are even tax incentives for homeowners with solar water heaters and geothermal heating. 

Don’t let the expense of buying a home hold you back

If you’ve held off on buying a house because of the expenses, remember that there are plenty of ways you can save. It’s not just tax incentives that can help, either. You can find some incredible listings through RealtyHive, and since they’re time-limited events, you might save more than you thought. Check out our homes for sale today!

Home Ownership & Taxes: What You Need to Know

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Just like marriage, word on the street is that there are tax benefits to owning a home. But how do real estate incentives work? How does this vary in different states? When it comes to taxes and home ownership, what do you need to know?

A Few Tax Breaks for Homeowners

We’re kicking off this blog to cover the basics: As a homeowner, you’re eligible for several tax benefits. We’ll dive deeper into this in a later blog, but here are some initial things to keep in mind:

Tax IncentiveDescription
Mortgage interest reductionDeducts interest paid (if this number is at least $600) on a mortgage.
Property tax reductionIf filing jointly, you can claim up to $10,000 in property taxes.
Home equity debtDeducts interest paid on a home equity loan.

There are a ton more real estate tax incentives — so many that we’re saving them for a separate blog — but it’s good to think about now! Why wait until tax season to know how you as a homeowner can save?

Home Ownership And Taxes: FAQ

Buying a house is such an extensive process, full of information and details that take awhile to understand. Many first-time homeowners get so caught up in the house-buying process that they don’t realize how tax codes affect them. 

If this sounds familiar, don’t panic — finding answers to common tax questions is truly a “better late than never” scenario. In fact, much (if not all) of this info can save you thousands.

How does owning a home change your tax filings?

Homeowners fill out Form 1098 using information sent to them by their lender. If you paid at least $600 in interest on your mortgage, your lender will send you the proper documents to file for a tax break.

How do homeowner taxes change from state to state?

The biggest difference between states is property taxes. There is no state that doesn’t have property taxes, but there are huge differences across the map. Homeowners pay a percentage of their home’s value for property taxes (collected by their lender), and these taxes go towards schools, roads, and other state/city needs.

However, we should take this time to mention that state taxes vary drastically. Use this info as a starting point, but always talk to a tax consultant and do your research to know what’s what.

Which states have the highest and lowest property taxes?

States With the HIGHEST TaxesTax Rate
New Jersey1.89%
New Hampshire1.86%
Texas1.81%
States With the LOWEST TaxesTax Rate
Louisiana.18%
Hawaii.26%
Alabama.33%

*As of 2019.

It’s good to know what your state’s taxes are before you buy a home. If you’re as open to living in Texas as you are to living in Alabama, you could save thousands a year.

How are international properties affected?

International properties and taxes from country to country are an extremely murky area. It’s best to consult with a tax expert who’s familiar with the country where you own (or hope to own) property.

However, there is the Foreign Investment in Real Property Tax Act (FIRPTA) to content with. As Forbes reports, “FIRPTA is unusual in that it places a withholding requirement on buyers, as opposed to sellers, who purchase U.S. real property interests worth more than $300,000 from non-U.S. owners.”

As of 2016, this withholding requirement of the total purchase price is now 15% — up from 10% in years prior. This is good to keep in mind as you peruse any international listings.

How does tax filing work for rental property owners?

There are tons of deductions that landlords can take into account. Interest on loans, property depreciation, repairs, and travel expenses are some of the biggest deductibles. If you’re a rental property owner, make sure you keep track of every mile traveled between properties as well as a record of all repairs.

What should all homeowners do to prepare for tax season?

Our best advice is to keep records and do your research. If you’re not yet a homeowner but see this on the horizon, continue to research while you’re looking for the perfect home. A perfect home is a little less perfect if you haven’t properly taken taxes into account.

The amount to know about taxes is almost infinite — it’s likely well worth your while to consult a tax expert who can help you get the best real estate tax incentives. Just make sure you book an appointment before March or April!