Real Estate Monthly, Vol. 2, Iss. 4

REAL ESTATE MONTHLY

VOLUME 2, ISSUE 4
APRIL 7, 2017

5 Big Tax Breaks for Homeowners

A few changes have been made by the IRS for this year’s tax filing returns.

From USA Today / Jeff Reeves

Homeownership used to be called “the American dream.”

But recent statistics show the old notion of a white picket fence and a tree swing may not be the reality anymore for many Americans, with the U.S. homeownership rate in 2016 hitting its lowest level since 1965.

There are a host of reasons for that, including the fact that potential buyers feel they can’t afford real estate in many markets. But when you add up the costs and benefits of homeownership, it’s important to remember that owning a property can unlock some of the biggest potential tax breaks most families have access to.

It’s not just the home-related tax breaks you get access to, either, said Lisa Greene-Lewis, a CPA and tax expert for TurboTax. “Getting enough qualified expenses can top the standard deduction and push you over into itemizing, and allow you to deduct so many other expenses you wouldn’t be able to otherwise,” she said.

If you own a home and are looking to save on your taxes, or if you’re considering buying a home in 2017 and trying to see if you can afford it, here are five valuable deductions that you may be able to claim if you’re a homeowner:

Mortgage Interest

The interest paid on a home loan is typically the largest potential deduction for middle-class Americans, said Greene-Lewis. For instance, a 30-year mortgage on a $300,000 at current rates will run you more than $12,000 in interest payments your first year. If you happen to own a second home, too, you can also deduct the mortgage interest on that, as long as it isn’t a rental property.

Points

If you recently purchased a home but paid “points” to the bank in order to get a better rate, that expense is tax deductible in the year you paid them. A point is typically 1% of your loan amount so, on that $300,000 home, you would get a $3,000 tax break for paying down one point. Points on refinance loans and home equity loans are also deductible but must be spread over the life of the loan instead of all in one year’s return, so those are less lucrative but can still ad up.

Energy Credits

“If you make expenditures that improve the energy efficiency of your home, you may qualify for a tax credit,” said Neil Krishnaswamy, a certified financial planner at Exencial Wealth Advisors in Frisco, Texas. “These include items like insulation, windows, doors and roofs.” A tax credit is even better than a deduction, because they are dollar-for-dollar savings instead of simply saving you whatever tax you paid based on your income bracket. For instance, if you’re in the 28% tax bracket, then a $1,000 deduction lowers your tax bill only $280, while a credit lowers your tax bill by $1,000 regardless of your effective tax rate. There are limits on energy credits depending on what you purchased, but the dollar-for-dollar savings make them very valuable.

Property Taxes

State taxes levied on your primary residence is deductible, too, and can add up in a hurry depending on where you live. For instance, the Tax Foundation found, in 2015, that New Jersey residents typically pay almost 2.4% in property taxes – almost twice the national average, and about $7,000 on a $300,000 home. Deducting this big local tax bill can save you a lot on your federal return.

Casualty Losses

If you suffered property damage and weren’t reimbursed by an insurance company for repairs, you may be eligible for a big deduction. Whether it’s a flooding or a fallen tree or even vandalism, sometimes damage to your home can cost you thousands of dollars out-of-pocket. Your casualty loss deduction must exceed 10% of your adjusted gross income, so don’t bother writing off small-time repairs. But if you incur significant expenses repairing your home after an unfortunate event, document everything and tap into this tax break to ease some of the pain.

Jeff Reeves is executive editor of InvestorPlace.com.


Kosciusko County Market


February


Closings:
47 ⇩ 20% Y:Y


Median Closing Price:
$155,000 ⇧ 10% Y:Y


Median Days on Market:
48 ⇩ 19% Y:Y


New Listings:
83 ⇩ 12% Y:Y


Inventory: 
398 ⇩ 21% Y:Y


Sales / List Price:
96% ⇧ 1% Y:Y


Sellers’ Market

Elkhart County Market


February


Closings:
98 ⇧ 1% Y:Y


Median Closing Price:
$130,000 ⇧ 26% Y:Y


Median Days on Market:
48 ⇩ 10% Y:Y


New Listings:
149 ⇩ 5% Y:Y


Inventory: 
611 ⇩ 12% Y:Y


Sales / List Price:
96% — Y:Y


Sellers’ Market


The market update is the most current available due to data reporting and analytics by the state reporting board.


Did You Know?

England has a tax on televisions. Color TVs are taxed more than black-and-white TVs. However, if a blind person has a television, he or she has to pay only half the tax.



Illustration of man catching numbers with a net

How to DIY Your Taxes — and Not Miss a Single Deduction

Tips on choosing tax preparation software to help get all the homeowner benefits. Read

Math equation on chalkboard

When It’s Time to Get an Accountant to Do Your Taxes

Do you need a CPA? Or will a regular accountant do? Read

Three old ladies in front of a white building

9 Ways to Save on Your Home That Grandma Never Told You

Classic advice — with a few modern twists for today’s homeowners. Read

Visit houselogic.com for more articles like this.

© Copyright 2017 NATIONAL ASSOCIATION OF REALTORS®



eho-mls If your property is currently listed for sale or lease, this is not intended as a solicitation of that listing.

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