By: Miguel Burgos .-
With US tax season just around the corner, many homeowners—especially those who recently purchased a home or made major improvements—could be unknowingly leaving money on the table. The truth is that owning a home not only entails a great financial responsibility, it also opens the door to important tax benefits.
Although homeowners have access to a variety of deductions and credits that can significantly reduce their tax bill, many are unaware of them or don’t know how to apply them correctly.
Key Deductions for New Homeowners
One of the biggest tax incentives is the mortgage interest deduction. In the 2023 tax year, Americans took advantage of more than $8 billion in tax benefits related to homeownership, according to federal data.
The first few years of a mortgage loan are especially advantageous because most payments go toward interest, and that is deductible. Additionally, property tax payments can also be deducted, which represents a double benefit for taxpayers.
For first-time homeowners, there are additional incentives at the state and local levels, such as first-time buyer tax credits or closing cost reductions, which can have positive tax implications.
Did You Make Renovations? You Could Benefit
Home improvements not only increase the value of the property, they can also have tax consequences. Renovations that make a home more energy efficient—such as solar panels, high-performance windows, or new HVAC systems—may qualify for federal tax credits under programs such as the Energy Efficient Home Improvement Credit.
It’s important to keep receipts and efficiency certificates because these documents will be needed when claiming the credits.
Other improvements, while not eligible for immediate credits, can increase the property’s tax basis, helping to reduce capital gains tax if the home is sold in the future.
Do you have a home office? More Possible Deductions
In the era of remote work, many homeowners have adapted their home spaces as offices. If certain IRS criteria are met, these spaces may be deductible as home offices, allowing you to deduct part of your rent (if rented), utilities, repairs, and more.
The key is that the space must be used exclusively for work purposes. Note: it can’t be the dining room or the baby’s room that you also use for Zoom calls.
Proactive Planning, Guaranteed Savings
Experts recommend that homeowners plan from day one how their housing decisions impact their taxes.
Many taxpayers are surprised to discover they could have saved hundreds or even thousands of dollars if they had organized their documents or planned their improvements better. The good news is that it’s never too late to start optimizing your tax strategy.
Whether you’ve bought your first home, remodeled your current property, or are considering a second home, learning about the available tax benefits can make a big difference on your next tax return.
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Photo-Notistarz- Miguel Burgos
