3 Common Tax Deductions for Pennsylvania Homeowners

If you own a home in Pennsylvania, there are three tax benefits worth knowing about: the mortgage interest deduction, the property tax deduction, and Pennsylvania property tax relief programs. The first two apply to your federal taxes, while Pennsylvania offers separate programs that can reduce what you pay in property taxes.

For over 30 years, Phoenix Tax Consultants has helped Pennsylvania taxpayers with tax preparation services and questions about the benefits available to homeowners. Let’s see how these deductions and property tax relief options work and whether you qualify.

1. Mortgage Interest Deduction

If you have a mortgage, part of your monthly payment goes toward interest. The Internal Revenue Service (IRS) allows you to deduct the eligible portion of that amount from your federal taxable income. To claim this deduction, you need to itemize.

This means that instead of using the standard deduction (a set amount the IRS lets you subtract from your income), you add up the deductions you qualify for, including the mortgage interest you’re allowed to deduct. If that total is higher, itemizing can reduce your taxable income more.

You can use Form 1098 to see how much mortgage interest you paid during the year. Your lender will usually send you this form.

There’s also a limit on how much mortgage debt you can use to calculate this deduction. For mortgages taken out after December 15, 2017, the limit is generally $750,000. This means that if your mortgage is higher, not all of the interest you pay will necessarily be deductible.

2. Property Tax Deduction

Property taxes can also be part of your itemized deductions. This includes, for example, the real estate taxes you pay based on your home’s value.

Property taxes are part of the federal state and local tax (SALT) deduction. Because SALT has an overall limit, the full amount of property tax you paid may not always be deductible.

Keep in mind that this deduction applies to your federal tax return. Pennsylvania doesn’t offer the same property tax deduction on your state income tax return.

3. Pennsylvania Property Tax Relief Programs

Pennsylvania offers separate programs that can reduce your property tax bill. Unlike the first two deductions, these programs provide state or local property tax relief.

• Homestead and Farmstead Exclusion Program: This can reduce certain school property taxes on your primary residence. You apply through your county assessment office, and the amount of relief depends on your local school district.

• Property Tax/Rent Rebate Program: This gives eligible homeowners money back on property taxes they paid. Eligibility depends on factors such as age or disability status. You can apply online through Pennsylvania’s myPATH portal.

Understand Your Tax Options as a Homeowner

As a homeowner, knowing which tax benefits apply to you can help you avoid paying more in taxes than necessary. Our team at Phoenix Tax Consultant is here to help you determine which deductions and tax relief options apply to your situation. Request an appointment through our website or call us at 610-933-3507.