5 Tax Write-Offs That Every Homeowner Should Be Aware Of
You’ve probably heard that owning a home entitles you to all kinds of breaks come tax time, but you might not have the foggiest notion of what write-offs you’re eligible for. While there are a lot more than five out there, and you should definitely discuss your options with a professional tax prep specialist, here are just a few that you should know about from the get-go.
- Mortgage interest. You can’t write off your monthly mortgage payment, per se, but you can deduct the portion that goes to pay interest each year (up to a certain amount – it tends to change annually to account for inflation, so check with your tax pro to find out if payments on all of your properties qualify). This tends to be the single greatest home-related deduction. For many homeowners, it provides great relief at tax time, and in many cases it can also deliver a return, whereas tax filings prior to owning a home may have had you shelling out money to the IRS every year.
- Equity line interest. Whether you’ve taken out a home equity line to pay off (basically consolidate) debt or you’re using the money for renovations that will add to the value of your home, you should know that you might be able to write off the interest payments on such a loan. However, there are restrictions on the amount of mortgage-related interest that you can deduct on your taxes each year, so you should definitely talk to your tax prep specialist to make sure you qualify for this deduction before you count on the money it will save you. The same goes for a second mortgage, and in some cases even a second residence.
- Home office. If you have a dedicated home office that you use exclusively for work, or even better, if you happen to work from home, you can secure all kinds of deductions based on business usage. For starters, you’ll have to determine the square footage of the space and then figure out what percentage of your overall interior space that number comprises (say 10% of your total square footage). From there you may be able to write off that percentage of your mortgage (principle), utilities, and so on. You can also deduct a dedicated work phone line, a portion of your internet cost, and any equipment, furniture, supplies, and so on bought for your home office.
- IRA withdrawals for first-time home buyers. It is important to note that there are distinct differences in making withdrawals from a regular IRA as opposed to a Roth IRA, but both come with certain restrictions as well as tax benefits when you use the money for your first home purchase. With a regular IRA, you can deduct up to a certain amount without penalty (although you’ll still have to pay taxes). And with a Roth IRA you can deduct quite a bit more without penalty or tax. You’ll simply have to check with the IRS to get accurate amounts for the current tax year.
- Moving expenses. When you move for a job and your new home is more than 50 miles away, you may be eligible to write off moving expenses for you and your family, including costs like travel, lodgings, and even a moving company for your stuff. And if you move to Canada you can take advantage of Ratesupermarket.ca GIC rates to save a down payment for your new home. But in the meantime, paying for the move is a little easier when you know you can write it off.