What homeowners should know about tax breaks in 2017
Tuesday, April 18th, 2017 – mark that day on your calendar, because it’s Tax Day in the United States.
Everyone dreads Tax Day. Luckily, if you are a homeowner or hope to buy a home in 2017, there are plenty of tax breaks that can help save money. Homeownership offers home tax deductions, tax credits and other breaks that aren't available to renters. Even first-time homeowners can take advantage of certain tax breaks.
Tax breaks change yearly, so homeowners should always stay aware of new tax deductions that could help save them money. In 2016, homeowners could benefit from certain tax deductions if they made eco-friendly, energy-efficient improvements to their home. However, these breaks expired at the end of 2016. Fortunately, there are plenty of other tax breaks you could consider. Home owners should check throughout the year for tax benefits that may return or start and always consult with their tax advisor.
Mortgage interest is among one of the largest tax deductions homeowners can get. According to Maurie Backman in Fox Business,
“The mortgage interest deduction could shave thousands of dollars off your tax bill if your loan amount is high enough. As long as your mortgage doesn't exceed $500,000 ($1 million if you file a joint return), you can write off whatever interest you pay for the year. This tax deduction can be especially beneficial in the early stages of your mortgage, when most of your payments go toward the interest portion of your loan.”
This deduction is great for first-time homebuyers or those who have recently bought a home.
Keep in mind that the deduction may vary depending on factors such as rates and the amount of mortgage. According to Jeff Reeves at usatoday.com,
“a 30-year mortgage on a $300,000 at current rates will run you more than $12,000 in interest payments your first year.”
To figure out what you could save on your mortgage in your first year, visit bankrate.com and utilize their Mortgage Tax Deduction Calculator or contact your tax advisor.
As a homeowner, you can also write off your property taxes, points on your mortgage, and private mortgage insurance premiums, provided you make $54,000 or less as a single tax filer or $109,000 or less as a couple filing jointly, though only if you itemize these deductions on your tax returns. Keep your settlement disclosure as it cites the fees paid. Property taxes can vary depending on your location and the value of your home. For more information on property tax rates, check out Maurie Backman’s article from The Motley Fool – Maryland has a tax rate of 1.08%, which is in the middle compared to most other states.
As mentioned before, you can no longer get tax breaks for making energy-efficient upgrades to your home. However, if you use a home equity loan to finance improvements, the loan can qualify for the same mortgage interest deductions as your main mortgage. By keeping up with housing trends and installing new flooring, roofing and siding every few years or even just replacing a front door, these home improvements may be able to pay for themselves around tax season.
Tax Information for Homeowners directly from the Department of the Treasury.
Disclaimer: The best source to figure out your taxes is irs.gov. Always check with a tax expert or accountant when preparing taxes.
Work Cited
Backman, Maurie. “The 6 Best Tax Deductions for 2017.” Fox Business. 18 Dec. 2016. http://www.foxbusiness.com/markets/2016/12/18/6-best-tax-deductions-for-... 2017.html. Accessed 1 Mar. 2017.
Backman, Maurie. “Here's What the Average American Pays in Property Taxes.” The Motley Fool. 27 Jan. 2017. https://www.fool.com/retirement/2017/01/27/heres-what-the-average-americ.... Accessed 2 Mar. 2017.
Harbour, Sarita. “7 Tax Breaks Every First-Time Homebuyer Should Know.” Go Banking Rates. 18 Feb. 2017. https://www.gobankingrates.com/personal-finance/9-tax-breaks-first-time-.... Accessed 1 Mar. 2017.
Reeves, Jeff. “5 big tax breaks for homeowners.” USA Today. 21 Feb. 2017. http://www.usatoday.com/story/money/personalfinance/2017/02/21/5-big-tax.... Accessed 1 Mar. 2017.