10 Tax Benefits of Owning a Home

With tax day just around the corner, I’ve compiled a list of the most popular tax benefits of owning a home. If you’re a homeowner, review each of these points to ensure you have taken advantage of all applicable deductions or credits. And, if you are a renter, keep these in mind as you consider entering the market.

1. Mortgage Interest: Of course, this is the most common tax benefit of owning a home. Your interest – for the entire year – can be deducted for not only your primary residence, but also your secondary home. For a $250,000 loan, this averages out to about $10,000 of interest per year.

2. Property Tax: In addition to interest, property tax is another large portion of your home expenses each year. Though tax rates vary depending on your county/location and home value, this is a consistent deduction you can count on year after year – even after your mortgage is paid off.

3. Mortgage Points: Mortgage points are fees paid to lenders to receive a reduced interest rate. These “points” are paid at the time of closing – and therefore are a one time tax deduction and generally claimed the year of purchase. As a one-time deduction, it is often overlooked by new homeowners even though it is a valuable benefit resulting in large savings.

4. PMI: Private Mortgage Insurance (PMI) is added insurance lenders require if the borrower does not put 20% down at the time of purchase. PMI is usually a small percentage of the overall loan amount, but over time it adds up to a sizable tax benefit you don’t want to miss out on.

5. Capital Gains: As a homeowner, you do not need to pay tax on up to $250,000 ($500,000 if married) of financial gains acquired on the sale of your primary home. There are a few restrictions surrounding this large benefit, which can be found here.

6. Interest on Equity Loan or Line of Credit: Regardless of the reason for the loan, you are able to deduct the interest on up to $100,000 of a home equity loan or home equity line of credit.

7. Home Office: If you have a dedicated space in your home used solely for work, you are likely able to write-it off as a business expense. Learn more about the requirements and benefits here.

8. Casualty Losses: If your property suffers casualty, disaster or theft, you can deduct related expenses on your taxes. Though this does not include damages covered by insurance, there may be additional deductions you could benefit from as stated here.

9. Energy Improvements: The residential energy efficiency tax credit expired in 2016 – so if you made any qualifying upgrades on your doors, window, roof, etc… this is your final year to claim purchases. And, from 2017 through 2021 the government is offering a credit for solar energy systems.

10. Medical Upgrades: If you have aging parents, this is an important deduction to keep in mind, especially if they are deciding whether it is more beneficial to stay at home or move for medical reasons. Ramps, door and entry widening, hand rails, etc… are all upgrades that could be deducted if qualifications are met (learn more here).