With the start of a new year coming very soon, the one topic that will be top of mind is taxes. And everyone’s No. 1 question is how they can save on the amount of taxes they’ll be paying in 2022. As a homeowner, you’re already ahead of the game and can take advantage of tax deductions specific to homeownership.
Here are five tax breaks for homeowners:
- Simply by owning a home, you’ll qualify for a tax break. Homeowners can deduct the interest they paid on their mortgage, their mortgage insurance premiums and state/local real estate taxes on their property. By itemizing these deductions on your tax returns, you could save an average of $500 on your annual tax bill.
Also, if you happened to sell a home this year, don’t forget to deduct the real estate taxes you paid on the close of that sale.
- Depending on the size and location of your home, you may be paying out a great deal in property taxes. Reclaim some of your expenses by deducting your property taxes on your income tax return. Tip: make sure you claim the deduction in the same year that you made the actual payment.
- If you have a designated home office, you can deduct that on your taxes. This is especially great for people who have their own home-based business. Many people worry that writing off a home office will raise red flags and trigger an IRS audit. But if you make the deductions properly and everything is above board, you’ll be in good shape.
Also, don’t forget to deduct other expenses associated with keeping that home office running, such as electricity, Internet service, trash pickup, water and even your homeowners insurance.
As this article highlighting major tax breaks for homeowners explains, you simply need to determine these annual costs and then prorate them based on the size of your home office relative to the overall size of your house. For example, if you have a 2,000-square foot house and the home office is 200 square feet, you can deduct 10 percent of your total expenses on your tax returns.
- Making significant home improvements can save you money on taxes when you sell your house. You can deduct major improvements (adding a deck or a complete kitchen redo) but not everyday repairs such as fixing a busted water pipe. Don’t forget to save all your receipts so you get the full tax breaks for homeowners.
- Have an extra house? Maybe this year you inherited your parents’ home after they passed away. But it’s in another state and you’re not interested in keeping it. Depending on your financial situation, it may be better to take advantage of the tax benefitsby donating your house to charity rather than selling it outright.
There are a lot of ways to take advantage of tax breaks for homeowners when it comes to itemizing deductions. You home is most likely your biggest investment and your biggest expense, so make it work for you by helping you save money on your annual tax bill. Work closely with your accountant or tax adviser to ensure you’re getting all the deductions you can and also that your deductions comply with state and federal tax laws.
Learn more about Manning Insurance Services‘ Homeowner Insurance Policies.