Owning a house is a big undertaking. Not only are you responsible for your mortgage payments, you also have to deal with property taxes, insurance, maintenance and repairs. However, the good news is that your home this year can be a source of savings for your tax return, especially if you list items at the end.
As a reminder, you have two options for claiming tax deductions. You can claim the standard deduction (which is $ 12,000 for single tax applications for tax year 2018 and $ 24,000 for co-registered couples) itemize Your prints are more cost effective than opting for the standard. Since the standard deduction in 2018 has nearly doubled compared to the previous levels, many filers will likely find that item positioning is not worthwhile, and if you're one of them, you can not write off many of the following costs to your home. But if you are These articles can prove to be lucrative.
1. Mortgage Rates
You may have heard that the deduction of mortgage rates in 2018 has changed, and that's true. Prior to 2018, you were able to deduct interest on a mortgage loan of up to $ 1 million. For 2018, however, that threshold has been lowered to $ 750,000. However, if you signed your mortgage before December 15, 2017, you are embedded in the old system and can therefore charge you interest against the higher limit.
2. property taxes
Before 2018, there was no limit to the amount of government and local taxes you could deduct, and property taxes are part of this area. But now this total deduction is limited at 10,000, which means that if you live in a high property taxed area, you may not be writing off your entire property tax bill – but $ 10,000 is still better than nothing.
3. Interest on home equity loans
There is a rumor that the interest rate on home equity loans is no longer tax deductible, and this is true in certain circumstances. You can not deduct interest on a home loan that is used for purposes other than residential. For example, if you take out a home loan to pay for a vacation, interest rates are out of bounds. However, if you take out a home loan to renovate a bathroom, finish a basement, or update your windows, you can deduct the interest you are paying on that loan.
4. The deduction of the home office
If you are self-employed and work outside your home, you may be eligible for a home office deduction. In order to qualify, your home must be your main workplace, and you must have a place that is solely for work purposes. If this is the case, you can claim a deduction for your home office Schedule C (Profit or loss from the business), which means that you can make some savings, even if you do not list your tax return.
There are two ways to deduct your home office. First, you can claim $ 5 per square foot of office space up to 300 square meters or $ 1,500. Or you can deduct the expenses of your office instead. This may include direct expenses such as office supplies or indirect expenses such as utility bills, interest rate services and even your property taxes – expenses associated with owning your home and being able to work there. That means you can not just take over all your household expenses and write them off completely. Instead, you need to determine how much space your office uses relative to your home, and make a proportional deduction. For example, if your office uses 10% of your home and you spend $ 20,000 on household expenses, you can deduct $ 2,000.
Owning a home is a costly affair but can be the primary source of tax savings. Make sure that you maximize the tax benefits your homeowner is entitled to, if that makes sense. If you are a common filer eligible for a USD 10,000 mortgage and a $ 10,000 tax deduction, you should refrain from using it and claim the standard deduction if you can not claim any other deductions. However, if you're considering $ 15,000 in mortgage rates and $ 10,000 in property taxes, you'll automatically be ahead by dividing and writing off those expenses for your home.