Did you get them all?

Welcome to your home tax deduction checklist! For landlords, this type of advice is essential following all the changes introduced by the new tax plan, the Tax Cuts and Jobs Act 2017, which are still ongoing.

The biggest change for 2021? The standard deduction jumped by a few hundred dollars for taxpayers – to $12,550 for individuals, $18,800 for heads of families and $25,100 for married couples filing jointly. And that higher number means you have to dig into all of your household expenses to see if their total sum exceeds the standard deduction, depending on your filing status. (If the total does not exceed it, you will only have to take the standard deduction on your taxes when you declare.)

To help you, here is a list of all the tax breaks for owners.

Mortgage interest

In the past, you could deduct interest on up to $1 million of mortgage debt (or $500,000 if you filed a single claim).

“But for loans taken on or after December 15, 2017, only interest on the first $750,000 of mortgage debt is deductible,” explains William L. Hughescertified public accountant in Stuart, FL.

Mortgages are structured so that you initially pay more interest than principal. For example, in the first year of a $300,000 30-year loan at a fixed interest rate of 4%, you would deduct $10,920. (To find out how much you’ve paid or will pay in mortgage interest each year, enter your numbers into our online mortgage calculator.)

Note that taking this deduction under the new tax law requires itemized deductions, but it may be worth it, especially for new homeowners.

Mortgage points

If you bought a house and paid points, you can still deduct them from your taxes. They must be “true”, or points of discount, not points of origin. After all, points are essentially mortgage interest that you prepay, so it makes sense that they’re treated like the rest of your mortgage interest. Each point represents 1% of the loan amount, so if you paid 2 points on that $300,000 loan, you can deduct $6,000.


Watch: 5 Pet-Related Tax Deductions We Bet You Didn’t Know About


Private Mortgage Insurance

Good news! You can deduct private mortgage insurance (PMI) interest through the Mortgage Insurance Tax Deduction Act of 2021, which reinstated certain deductions and credits for homeowners that were due to expire in 2020.

If you can’t afford a 20% down payment on your home, most lenders require you to pay the PMI. The advantage: It’s tax deductible as long as your adjusted gross income is less than $100,000. (For every $1,000 you earn after that, you can deduct 10% less of your PMI, up to $109,000.) The PMI is usually between 0.3% and 1.5% of the loan amount per year, so on a loan of $300,000, you would deduct between $900 and $4,500.


Interest on equity in property

Homeowners often take out a home equity loan or home equity line of credit to tap into quick cash — for college, weddings, home renovations, or whatever — using their home as collateral. And until 2017, homeowners could deduct interest on their home equity up to $100,000 for married joint filers.

Now? “Interest deductions on home equity have been eliminated,” says Eric Bronnenkant, Chartered Accountant and Financial Planner, and Head of Taxes at Betterment. That is, unless you’re spending money on just one thing: home improvements.

So if you’re looking forward to remodeling that kitchen, that deduction still stands. But if you have to pay the bill for your daughter’s wedding, the IRS will no longer intervene, explains Amy JucoskiCertified Financial Planner and Head of National Planning at Abbot Downing.

And unlike mortgage interest deductions, the new home equity rules apply to all loans, regardless of when they were contracted. And to reap the benefits, your total debt, which is your mortgage plus your home equity loan, cannot exceed the new limit of $750,000.

Property taxes

In the good old days of 2017, your property taxes were fully tax deductible.

This tax season, there is a $10,000 cap on the combined amount of your property taxes, state and local income taxes, and (for states without income tax) deductible sales tax.

A bright side for landlords and those with vacation homes: “You can take deductions for all the properties you own, in addition to adding your state income tax,” says Steven Weillpresident of RMS Accounting, in Fort Lauderdale, FL.

Energy efficiency improvements

Did you add solar panels or a solar water heater last year? This means that you can help yourself with a tax credit.

According to Bishop L. Toups, a tax attorney in Venice, FL, qualifying solar electric panels and solar water heaters are good for a credit of 26% of the cost of equipment and installation. For a green investment of $30,000, that’s a nice return of $7,800!

Note that this credit will increase to 22% for installation after December 31, 2022 and before January 1, 2024. Effective immediately, the credit ends entirely after 2024.

Home office deduction

The home office tax deduction is gone for all W-2 employees who have an office away from home. could use if they wanted. The only people who can continue to get this deduction are those who actually run their own home-based business, says Joshua Hanoversenior executive at Marks Paneth.

Using the simplified home office deduction, self-employed individuals can take $5 for each square foot of office space, up to a maximum of 300 square feet. For a 200 square foot home office, you’re looking at a nice $1,000 deduction. Don’t try to do fun things – it should be a dedicated home office, used only for work. Learn more about the home office tax deduction.

The post Your Housing Tax Deduction Checklist: Did You Get Them All? appeared first on Real Estate News & Insights | realtor.com®.

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