Get Your Money Back - 9 Tax Rewards Just for Homeowners
The majority of us are not huge fans of wasting hard-earned money. Yet, every year American taxpayers leave hundreds of millions of tax deductions and home-related tax benefits on the table.
You own the house for better or worse, the least you can do is squeeze every last tax benefit out of it humanly possible. Here are nine of the best opportunities your home offer you to keep what’s yours.
Energy Efficient & Green Improvements
Renovating smart with energy efficiency and sustainability at the forefront is smart on so many levels. You save every single month on your energy bills, your house demands a higher price when you get ready to sell, AND the IRS rewards your efforts handsomely.
By making savvy improvements, like installing double-paned windows, attic insulation, a new roof, or new exterior doors, you can deduct up to 10% of their cost (up to a maximum of $500). Upgrade to any energy-efficient equipment - such as your water heater, or furnace - and you get a credit of 30% of the cost. Creating an energy efficient home is not just good for the earth, it's smart business.
Handicap Accessibility & Health-Related Renovations
Widening doors, adding entrance ramps, installing railings, adjusting the height of electrical fixtures, sinks, or other appliances to accommodate wheelchairs can all be tax-deductible.
Short-Term Rental Income
If you rent out your home for fewer than 14 days, that income is all yours and not taxable. And even if you go for the big bucks — renting for $5,000 or $10,000 a week — it still stays in your pocket (and the expenses of renting aren’t deductible either).
Real Estate Property Taxes
Real estate property taxes paid on both your primary residence and a vacation home are fully deductible for income tax purposes.
For the majority of Americans, property tax isn't going to show up on a W4. Since most escrow those payments in with their monthly mortgage it can be easy to forget the deduction. If you itemize your deductions, it's certainly worthwhile to add your property tax payments from the given year to your write-offs.
Mortgage Interest Deduction
The five-star deduction. U.S. tax code allows homeowners to deduct the mortgage interest from their tax obligations. For many people, this is a huge deduction since interest payments can be the largest component of your mortgage payment during the early years of owning a home. In addition to your mortgage interest, you can deduct the interest you pay on a home equity loan (or line of credit).
Using home equity lines can allow you to shift credit card debts to your home equity loan, pay a lower interest rate than those horrendously exorbitant credit card interest rates, and get a deduction on the interest as well.
Closing & Home Acquisition Costs
In the tax year that you buy your home, you’re able to claim the discount points as a tax deduction. When you refinance, however, the discount points paid must be deducted over the life of the loan. Pay attention to those time-based deduction calculations, they can get tricky.
Capital Gains Tax
If you buy a home as your primary residence to live in for more than two years, then you will qualify. When you sell, you can keep profits up to $250,000 if you’re single, $500,000 if you’re married, and not owe any capital gains taxes.
Moving Expense Deduction
Sometimes we find ourselves in the position of not just having to improve our homes, but also have to get rid of them entirely. While we already covered how selling a house has its tax benefits, you should also know that if you're forced to move for a job, you can write off some pretty nice deductions too.
You do have to qualify, and that includes making sure the new digs are 50 miles (80 kilometers) or more from your old place. You also have to make sure the dates of your move reasonably line up with your story.
Additionally, if you do have to buy a new place due to relocation for work, know that your moving expenses — and that includes transportation, temporary housing, even storage, and shipping — are all deductible. It’s your money. Get it back.