Many people in the US are motivated to buy their own home solely due to the tax breaks available for homeowners. Whether you are considering buying a home or are already a homeowner, it’s a wise idea to understand how these tax breaks are handled in 2019.
Also, since the new Tax Cuts and Jobs Act went into effect on January 1st, 2018, you might be wondering how this change will impact your tax perks.
Read on to understand available tax deductions you should be aware of this year so you don’t miss out on anything that could save you money on your return. Please note each tax return is different and although this is a current list, other opportunities may be available based on your income level.
Mortgage Interest Tax Deduction
The promise of a mortgage interest deduction never failed to captivate potential homeowners until 2017. Even though the new tax bill hasn’t done away with the deduction completely, it has changed it considerably.
If your mortgage went into effect before December 15th, 2017, you will be allowed to continue deducting interest on loans up to the first $1 million of the loan. But if you bought your house after December 15th, 2017, you’ll be only allowed to deduct the interest on the first $750,000 acquisition debt.
Property Taxes for Homeowners
If you are paying property tax on a car, home, boat, or other personal property, you can count it as an itemized deduction. This deduction, along with the deduction for sales tax or income tax, falls into the SALT (State and Local Taxes) deduction category.
The new tax bill has limited the total amount of SALT taxes you can deduct by capping it at $10,000 a year.
Mortgage or Home Equity Points
A home mortgage point is equal to 1% of the amount of your loan. So, if your home loan is $200,000, one point will be equal to $2,000. You can deduct the full amount of your points in the year you buy your home.
Home equity points are considered an itemized deduction and if eligible you can claim them on Schedule A of Form 1040.
Energy Efficiency Incentives for Tax Returns
If you have solar energy based heating or cooling systems in your home, you can save a good amount of money. And, there is a credit available so you don’t have to worry about itemizing.
The percentage of the credit will depend on the date you installed the system. If your solar equipment was installed between January 1st, 2017 and December 31st, 2019, you can claim credit for 30% of your installation expenses.
Home Office Expenses
The bad news: gone are the days when you could deduct your office space and expenses if you worked from home whenever you wanted. However, there is some good news too!
If you are self-employed and your home is the main place you work. An easy way that you can claim a home office deduction is to use the simplified method. You can claim a maximum deduction of $1,500 in the form of $5 deduction per square-foot for up to 300 square-feet. If you want to know more about the home office tax deductions, feel free to check out this detailed IRS guide.
What to do if you are unsure about taking a tax deduction?
This post is a short overview of the several tax deductions that might be available to you, and as you probably know by now, some of them have pages-long stipulations attached to them. Unfortunately, we can’t possibly cover it all in one post. If you are not sure about your ability to claim any of the deductions mentioned in this article, don’t hesitate to contact our experienced tax professionals for guidance. You can call us at 610-933-3507 or leave us a message here for a free consultation to discuss your personal tax situation.