If you’re new to the world of homeownership, you may not be fully aware of the tax benefits you are now entitled to. You could be pleasantly surprised at how much money you’re eligible to get back. So as you’re preparing your taxes for 2018, be sure to keep in mind these tax deductions for homeowners:
Tax Deductions for Homeowners in 2018
Some of the homeowner related tax deductions you could be eligible for involved with your mortgage, including:
- Mortgage Interest Deduction
This is typically the biggest tax break for homeowners, as you’re currently eligible to write off interest payments made on a loan up to $375,000 for a single tax filer and up to $750,000 for joint filers. Its particularly useful during the first years of your mortgage, when the majority of your payments are being applied to the mortgage interest rather than the principle.
- Mortgage Points Deduction
Mortgage points are, in essence, a fee that is paid up-front to your lender in order to receive a reduced interest rate. If you’re eligible to deduct all the interest you paid on your mortgage, typically you’re able to deduct all the points as well.
A point is equivalent to 1% of your loan value. So if you paid 2 points on your $250,000 mortgage, for instance, you’re likely able to write that $5,000 ($250,000 X 2%) off of your taxes.
- Private Mortgage Insurance (PMI) Deduction
You’re potentially eligible for this tax break if you weren’t able to put a 20% down payment on your home and received a mortgage insurance policy. This deduction is for the PMI payments you’ve made. To meet the requirements for a full deduction, single tax filers cannot exceed $50,000 of income, and joint filers can’t exceed $100,000. Your PMI deduction decreases if your income is over those thresholds.
Other possible tax deductions for homeowners to look out for:
- Property Tax Deduction
If you live in a state with high real estate property taxes (such as New Jersey, Illinois, or New Hampshire), the bright side is that you’re able to take a higher property tax deduction. You must claim this deduction in the year that you made the payments.
- Home Office Deduction
This is only applicable if you’re self-employed and have a home office dedicated for business use. If this is the case for you, the IRS allows you to write off a these expenses if they exceed 2% of your adjusted gross income.
You may be wondering, “What about my moving expense deduction?” In 2018 moving expenses will not be tax deductible. Learn more about Paying for Relocation in 2018.