Which Tax Breaks Can Homeowners Claim in 2024?
January 29 marks the start of tax filing season. Like searching for loose change between the sofa cushions, homeowners are poring through receipts looking for applicable tax writeoffs at the maximum level.
Homeowners can take the standard deduction ($13,850 for single tax filers, $20,800 for heads of household or married filing separately, or $27,700 as a couple) or they can itemize, such as deducting charitable contributions and state taxes.
Do you know what the biggest tax break a homeowner can get? Mortgage interest! It is also one of the most commonly used tax breaks. Homeowners filing jointly can write off the interest on mortgages of up to $1 million ($750,000 for loans made after December 15, 2017). Those filing as single can only write off interest on loans of up to $500,000 ($375,000 for loans made after December 15, 2017). Interest from home equity loans and second mortgages can be written off as well.
Points on mortgage — also known as “discount points” — not only save you money on your mortgage, but they also save you money on your taxes. Mortgage points count as prepaid interest, according to the Internal Revenue Service, so you can write off the amount paid for the points, on top of the interest.
New homeowners can receive a tax credit through the Mortgage Credit Certificate (MCC) program. This is for first-time homebuyers who sought financial assistance in purchasing a home. The Federal Housing Agency sets the MCC percentage rate between 10-50%, allowing homeowners to receive up to a $2,000 tax credit.
Although home sales can be capital gains, you can pay less by including cost basis. That includes the amount paid for the home, the price of improvements and depreciation or damage. But those who lived in their house for two of the last five years before selling are eligible for a tax deduction of $500,000 for married joint filers, $250,000 for filers who are unmarried or are married, but filing separately.
Lastly, any modifications made to the house for medical needs can be written off. However, these are tax-deductible only if the amount exceeds 7.5% of the adjusted gross income.
It is advised that homeowners meet with a tax professional to determine which tax deductions they are entitled to.
