The due date for taxes is April 18, 2023. But before you file, be sure you are aware of the tax perks of homeownership. Check out these five potential homeowner tax breaks for 2022.
The mortgage interest deduction is an itemized deduction. This means that for it to work in your favor, all your itemized deductions need to be greater than the standard deduction.
Note that for the 2022 tax year, those standard deduction amounts increased. For individuals, this deduction is now $12,950, and for married couples filing jointly, it is now $25,900. For the head of household, this deduction went up to $19,400. And if you are 65 or older, you can add on an extra $1,400 per person if you are married and filing jointly or an extra $1,750 if you are a single filer.
And remember—the more recent your mortgage, the greater your tax savings will be.
Property taxes are on that itemized list of all your deductions that must add up to more than your standard deduction.
Taxpayers can take one $10,000 deduction. This deduction is capped at $10,000 for those who are married and filing jointly.
Note: If you have a mortgage, your property taxes are built into your monthly payment.
Interest on a home equity line of credit
If you have a home equity line of credit, or HELOC, the interest you pay on that loan is deductible only if that loan is used specifically to “buy, build or improve a property.”
Essentially, you will have some cash if your home needs repairs or upgrades. But you cannot use that money for things such as weddings or college tuition.
You can deduct up to the $750,000 cap—this is for the amount you pay in interest on your HELOC and mortgage combined. But note, if you took out a HELOC before the new 2018 tax plan for anything other than improvements to your home, you cannot deduct the interest.
Are you self-employed, with your home office being your principal place of work? Good news! You can deduct $5 per square foot, up to 300 square feet, of office space. The maximum deduction your home office can receive is $1,500.
For those taking this deduction, know that there are very strict rules on what constitutes fully-deductible home office space.
In addition, understand that if you are still working remotely, you are still a W-2 employee and are not eligible for this deduction under the CARES Act.
To receive the home improvement tax break, your improvements have to exceed 7.5% of your adjusted gross income.
Deductible improvements can include widening doorways, lowering cabinets, fixing electrical or adding stairlifts. For some homeowners who plan to add renovations such as wheelchair ramps and grab bars in the bathrooms, for example, the cost of improvements can result in a nice tax break.
You will need a letter from your doctor to prove that these changes were medically necessary.
Be sure you keep these potential homeowner tax breaks for 2022 in mind when filing your taxes in 2023. These breaks and homeownership tax perks can save you money!
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