Tax season is here! It might not be anybody’s favorite time of year, but for homeowners, there is some good news on the horizon. As an owner, you qualify for dozens more tax deductions than renters (who have almost no deductions available). Here are a few things you’ll want to make sure you write off on your taxes:
Tax Deductions for Homeowners
Tax deductions are available for any type of home, be it a mobile home, single-family home, townhouse, or condo. And here are some big expenses you should be deducting:
Mortgage Interest: It’s part of your monthly payment, and the total amount you pay over the course of the year can be written off on your annual taxes. You can also write off the interest from refinancing a home or taking out a home equity loan or line of credit.
Points Paid: If you paid points to get a better interest rate, they can also be deducted from the year you paid them. For reference, 1 point = 1% of the principal loan amount.
Property Taxes: Even once your home is paid off, you will continue to pay property taxes, which means that you’ll always enjoy the benefit of writing off the taxes you pay every year.
Tax Deductions for Second Homeowners
You might be aware of the tax benefits available to owners of primary residences, but many Crystal Coast home buyers are vacationers and second home buyers. The good news is, you still get the same tax benefits as on your primary residence—and can even claim a boat or an RV as a second home, as long as it has cooking, sleeping, and bathroom facilities.
The only stipulation comes when renting. You (or your family) must spend at least 14 days (or 10% as much as the time it’s rented) in the home, or it will be considered a rental property—which means you’ll qualify for different tax breaks and be taxed on rental income as well.
Tax Deductions for Investment & Rental Homeowners
If you stay in your second home fewer than 14 days a year and rent it out the rest of the time, then it’s considered a rental or investment property. The good news is that there are even more deductions you can claim,in addition to mortgage interest and property taxes. For example, you can deduct expenses such as fees to property managers, utilities paid, rental loss, and up to 50% depreciation. The only catch is that you do need to report rental income.
What’s Not Deductible?
Though there are quite a few deductions available to homeowners, there are a few things you’ll pay that you won’t be able to deduct, such as homeowners insurance, private mortgage insurance, HOA dues, additional principal payments made, depreciation, closing costs, neighborhood improvement fees, and repairs and updates to your own home (unless you can prove increased energy efficiency or green certifications).
Tax Deductions for Sellers
Selling a vacation home or perhaps selling your primary residence to move into your vacation home full-time? The good news is that you won’t be taxed on capital gains on your home!
Thinking of Buying a Vacation Home on the Crystal Coast?
Then it’s time to contact Linda Rike Real Estate. Not only can we help remind you of the outstanding tax credits you’re eligible for, we can also help you explore the communities of the Crystal Coast, find your perfect neighborhood, and find your dream vacation home here. Let’s get started today.