Tax season is fast approaching. If you purchased or sold a home last year, there are several tax benefits and rules that impact your return. Here are key tax details homeowners should keep in mind.
Home Mortgage Interest Deductions
One of the most common tax breaks for homeowners is the mortgage interest deduction. The amount you can deduct depends on when your mortgage was finalized:
- Mortgages Closed Before December 16, 2017: You can deduct mortgage interest on a loan balance up to $1 million.
- Mortgages Closed After December 16, 2017: The deduction limit drops to $750,000 for both primary residences and second homes.
Property Tax Deductions
You can deduct up to $10,000 for a combination of state and local property, income, and sales taxes. This applies to property taxes on your primary home, a vacation home, and even undeveloped land. Keep in mind that the $10,000 cap applies to all state and local taxes.
Mortgage Insurance Premiums
If you paid for private mortgage insurance (PMI) last year, you qualify for a deduction—depending on your income. PMI is required when you put down less than 20% on a home. This deduction provides some financial relief at tax time.
Capital Gains Tax Exclusions
If you sold your primary residence in 2024, you may be eligible for a capital gains tax exclusion. Married couples filing jointly can exclude up to $500,000 in capital gains. Single filers can exclude up to $250,000, if they lived in the home for two of the last five years. This can be a huge benefit for reducing your taxable income from the sale of your home.
Consult a Tax Professional
These are just a few of the housing-related tax benefits you can take advantage of. Keep in mind that tax laws can change and vary based on your personal circumstances. It is a good idea to consult with a tax advisor to get the full range of deductions available.
If you have any questions about real estate or need assistance, feel free to contact me.
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