The Best Homeowner Tax Deductions To Save You Money

If you are already a homeowner or planning to become one soon, it is important to understand which tax deductions you might be able to take advantage of. While you might not be able to get your money back for every can of paint you buy to paint your walls with, there are some other ways you might be able to get tax breaks courtesy of your home, from mortgage interest to certain home repairs.

 

Deductible Expenses Explained for Tax Returns Filed in 2024

The IRS allows you to decrease the amount of your income that gets taxed by subtracting (or deducting) the cost of certain expenses. For example, if you spend $2,000 on local property taxes, you likely won’t pay income taxes on that $2,000. Keep in mind: This is for federal taxes, not state or local taxes.

 

Qualifying Deductible Expenses for the 2023 Tax Year

For 2024, there are several tax benefits to be on the lookout for. Of course, you will want to research any potential tax break thoroughly and discuss with a tax professional before filing your taxes.

Mortgage Interest
The mortgage tax deduction is something every homeowner looking to make homeownership a little bit more affordable should be aware of. This deduction should slash the federal income tax paid by qualifying homeowners, decreasing their taxable income by the amount of mortgage interest they paid. If you paid $4,500 in mortgage interest this year, you likely won’t pay income taxes on that $4,500 come tax season.

Discount Points
Mortgage points are upfront interest payments made at the closing of a home loan to lower the overall interest rate. Each point typically equals 1% of the loan amount. These points can reduce long-term interest costs and the IRS also may allow you to deduct the total amount of your points during the year you pay them.

State & Local Property Taxes
State and local property taxes are often out of sight out of mind, especially since they are usually looped into mortgage payments, but they offer tax deductions you won’t want to miss out on. The IRS may allow you to deduct up to $10,000 ($5,000 if married filing separately) for a combination of state and local income or sales taxes and property taxes.

Select Home Repairs
While home repairs are generally not tax deductible, certain energy efficient or medical upgrades to homes can qualify for tax credits and deductions. Check out what home improvements are tax deductible here.

 

Non-deductible Expenses on Tax Returns

Examples of Non-deductible Expenses

• Homeowners insurance
• Depreciation
• Most home repairs
• Private mortgage insurance
• Utilities or utility fees for repairs or upgrades
• HOA fees and dues

 

Choosing Between Standard Deduction vs Itemized

The IRS allows tax filers to deduct a fixed amount each year. For 2023, the standard deduction is:

• $27,700 for married couples filing together
• $13,850 for individuals

If you have certain expenses that exceed the standard deduction, you’ll want to look into doing an itemized deduction. Otherwise, it may be beneficial to take the standard deduction instead. Working with a certified tax professional is always a good idea if you are unsure of which route to follow.

 

Tax Credits vs Tax Deductions

Tax deductions simply decrease the amount of income you pay income taxes on. Simply put, if you have $45,000 of taxable income, but have an additional $5,000 deduction, you’ll only pay income taxes on $40,000 to the federal government.

Tax credits, on the other hand, refer to money that is given back to you, dollar for dollar, by the IRS on behalf of the federal government. If you receive a $1,500 tax credit, your tax liability (the amount you pay each year) will be reduced by $1,500, often resulting in a tax refund!

 

Talk to a Tax Professional or CPA in Michigan

While we specialize in a variety of home mortgage needs, we at Treadstone are not tax professionals. That said, we do work with many of them each day and can connect you with the right tax professional to take the pain out of understanding your taxes.

Treadstone Funding and its employees are not CPAs or financial advisors. Not financial advice. All information provided is for educational purposes only.

 

FAQ’s

What home improvements are tax deductible for 2023?
When it comes to home improvements, you might be able to take advantage of tax deductions for medical improvements made to your home or certain home office-related deductions. You can also explore tax credits for energy efficient home improvements.

Are home improvements tax deductible for rental property?
Rental home improvements are deductible through depreciation. Rental home repairs may be deductible.

Is a whole house generator tax deductible?
No, gas powered generators are not tax deductible. However, through certain energy-efficient credits, solar powered generators may be eligible.