It’s time to wrangle up your receipts and get working on your 2022 tax return. Our agent, Evan Hopkins, is also an accountant, so this is his busy season!
You probably know you can deduct your mortgage interest but there are other deductions and credits out there for homeowners. Here are a few tax tips you may find beneficial.
You can deduct the mortgage interest paid on your home for the first $750,000 ($375,000 if married filing separately) on debt. Though, you can no longer deduct your mortgage insurance premiums or home equity loan interest.
We pay taxes in so many places, thankfully some of them you can deduct on your federal income tax return.
- Property taxes paid for your home
- Personal property taxes paid for your car or boat
- State/Local income taxes
Since the pandemic, many of us are working from home at least part of the time. That doesn’t mean you necessarily qualify for this deduction. If you are self-employed you qualify; if you are employed by a company, you don’t. You also need to use a portion of your home exclusively for business (renters qualify too). Writing from your dining room table doesn’t qualify. This is a tricky one. Make sure you check out the IRS requirements or consult a tax professional.
If you made improvements to your home that make it more energy efficient, you could be eligible for a credit. Examples include exterior doors and windows, insulation materials, air conditioners, water heaters and more. For 2022, the maximum is $500, but that’s being increased to up to $1,200 starting next year, so keep that in mind as you contemplate renovations.
Certain capital expenses are deductible if they were done in order to care for yourself, a spouse or a dependent. Remodeling your kitchen doesn’t qualify (sorry). If you built ramps to enter and exit your home, widened doorways, installed railings or made other changes to accommodate a disabled condition, it could be considered a medical expense and you may be eligible for a deduction.
In addition to those related to your home, there are some often overlooked credits and deductions for which you could be eligible.
Most people know they could get a tax deduction for making contributions to a retirement account like an IRA. But you may not know about the Retirement Savings Contributions Credit, often known as the Saver’s Credit. It’s calculated on a sliding scale. If your adjusted gross income (AGI) is between $43,501 and $73,000 you could qualify for a tax credit of 10 to 50% of the amount of your contribution.
Every little bit helps, right? So often, teachers use their own money to pay for classroom materials. The IRS allows K-12 educators to deduct up to $250 for educational supplies.
If you take undergraduate, graduate or courses to improve your job skills, you could be eligible for a tax credit of up to $2,000. There are income limitations.
If you’re not sure what qualifies as a deduction or credit, ask a tax professional. They know the ins and outs of the tax code (so the rest of us don’t have to, whew!).
Since home prices and rent have gone up, these tax breaks not only make home ownership more attractive, but also reduce the long-term cost of owning a home. Our real estate brokers are happy to help you weigh the potential tax benefits of buying a home.