November 14, 2024
Homeownership comes with tax advantages that can play a crucial role in your overall tax strategy. We are going to explain what tax benefits the IRS offers for individual income tax related to homeownership.
Homeowners can deduct mortgage interest on their tax returns, which can significantly reduce taxable income. In contract, rent payments are not deductible.
Property and state income taxes combined are deductible up to $10,000.
Homeowners can exclude up to $250,000 ($500,000 for married filing jointly) of gain from taxable income upon the sale of the home.
First-time homebuyers who make early withdrawals from IRAs and apply all of the withdrawn funds to the acquisition of a home are not subject to a penalty on withdrawal amounts up to $10,000.
Self-employed individuals may deduct a portion of the home used for business.
Homeowners can exclude from gross income any discharges of qualified principal residence indebtedness before 1/1/2026.
Energy-efficient home improvement credit for qualified property placed in service before 1/1/2033.
>Expenditures on new (not used) fixtures, equipment, and materials that meet energy efficiency standards are eligible for the tax credit.
(Example: exterior doors, windows, insulation, air conditioners, water heaters, etc.)
For the details on tax credit limits and eligible equipment, please see the following link:
https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit
Residential clean energy credit for qualified energy efficiency improvements placed in service before 1/1/2035.
>Expenditures on new clean energy systems for residential use are eligible for the tax credit.
(Example: solar panels, solar water heaters, wind turbines, etc.)
For the details on tax credit limits and eligible equipment, please see the following link:
https://www.irs.gov/credits-deductions/residential-clean-energy-credit
In summary, homeownership offers several tax advantages that can help reduce taxable income and enhance financial stability. If you have any questions regarding the tax benefits of homeowners, please contact us.
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