Homeownership is expensive, but it’s also valuable to the economy. So, the IRS rewards homeowners who care for their properties with tax credits.
These credits are valuable. In fact, they can save so much money come tax season that homeowners can’t afford to miss out on them.
Here are 3 tax credits not to be missed at tax time. Keep reading to learn how you can start saving.
1. Green Tax Credits
Tax credits are available for homeowners who have not only a green thumb but a green state of mind.The IRS offers credits for qualifying expenses on upgrades or new purchases of home assets.
Homeowners who install doors, windows, and skylights with an ENERGY STAR program rating can qualify for as much as $500 in tax credits.
Solar energy systems are another way to scoop up tax credits galore. Homeowners can write off up to 30% of the systems’ cost with no limit until 2019.
2. Capital Gains Exemption
Homeowners who bought inexpensively in up-and-upcoming neighborhoods and can reap the benefits when sale prices are significantly higher than the initial investment.
If a home was purchased for $250,000 and it is now worth $500,000, the homeowner is in luck.
Any money made on the sale of that house is pure profit – no capital gains taxes are required.
There are a few rules governing this exemption:
- The maximum amount that can be exempted for couples is $500,000.
- The owner must have owned the home for two years.
- The owner must have used the property as a primary residence for two years.
Note: The owner doesn’t need to be living in the property at the time of sale. It can be rented for up to 3 years before the sale while still qualifying for the exclusion.
Unlike other capital gains profits, proceeds from the sale DO NOT need to be re-invested. They can be used in any way, including in the investment of a new property.
Alternatively, the 1031 exchange listings allow property owners to sell their properties and re-invest the profits in a new property as a way to avoid capital gains tax.
3. Mortgage Interest Deductions
The mortgage interest benefit is one of the most common tax deductions because everyone can deduct it. The only rule is the limit – $1 million for married couples or $500,000 for married couples filing separately.
The only rule is the limit – $1 million for married couples or $500,000 for married couples filing separately.
The mortgage interest deduction is filed with Form 1098. The average homeowner can see a deduction of thousands of dollars annually on their income taxes.
The average homeowner can see a deduction of thousands of dollars annually on their income taxes.
So while it’s not a credit per se, it does reduce the tax bill quite significantly depending on the size of the mortgage and the homeowner’s income.
Homeownership isn’t all about spending money – there’s money to be saved, too.
Be sure not to miss out on these or any other potential tax credits next year!