With housing costs increasing along with higher costs for supplies affecting home renovations, any tax deduction or credit can help make home ownership more affordable.
While most homeowners might know property taxes are deductible, some home ownership and improvement tax deductions and credits can easily be forgotten or overlooked when tax time comes around.
If you’re choosing to itemize and your total amount of deductions is more than the standard IRS amount, you can deduct your mortgage loan interest, insurance premiums and points. All these deductions can be found on Form 1098 which your mortgage lender will send to you.
Interest on home equity loans can also be deducted if the loan was used for home improvements.
Property taxes of up to $10,000 can also be deducted if you choose to itemize. This deduction can be found on forms you receive from your lender if paid through an escrow account. However, if you pay them directly, be sure to keep track of your payments for tax time.
Jessica Upshaw with The J Lending Team at Highlands Residential Mortgage says her group reminds new homeowners to check their closing disclosure and settlement sheet when tax time rolls around.
“There are a few items you might be able to write off. For example, if you reimbursed the seller for any property taxes at closing, you can find it here and claim that amount if itemizing.”
For those who completed home improvements in 2021, you could qualify for energy tax credits on anything from new doors to HVAC systems. A 10% credit of up to $500 can be claimed for energy-efficient windows, doors, qualifying central air conditioners, furnaces, heat pumps, water heaters and more.
Additionally, you could be eligible for a separate credit of up to 26% in 2021 if you purchased qualifying renewable energy equipment such as solar-powered generators or geothermal heat pumps.
If you made home improvements for medical reasons, these could also be tax-deductible if they don’t increase the value of your home. For example, adding a pool for water therapy is not deductible as this increases the overall home value.
Examples of medical home improvement expenses that are deducted include handrails, accessibility ramps or widened door frames.
Finally, people who are self-employed or own their own business can still take advantage of the home office tax deduction. Keep in mind that you must use a part of your home regularly and exclusively for your business to qualify.
For more helpful advice for homeowners, including a list of our professional home industry members to help with your future home remodeling or ownership plans, visit the Home Builders Association of Greater Chattanooga’s member directory at www.HBAGC.net.