Most homeowners know that they can take certain tax deductions on a home that renters simply can’t. Still, some homeowners are confused about how much they can benefit from owning a home. The new Tax Cuts and Jobs Act is making everyone scratch their heads, so we are here to tell you how you can claim a sum as a homeowner on taxes. And for those of you who don’t own a home, the great news is that renters can also claim some deductions. It’s a good time to have Renters Insurance and Homeowners Insurance! If you aren’t yet covered, call an Insurance Specialist who can explain your options: (888) 772-4247.
In order to claim tax deductions you first have to forgo the standard one, which is $6,350 for single filers and $12,700 for married filers. Also, know that in 2018, standard deductions will be almost twice what they are for 2017! It’s important that next year you only claim deductions if they exceed the standard one, which may be much larger than your individual deductions.
Homeowners can deduct the interest paid on a mortgage from their federal income taxes. For 2017, you can claim up to $1 million deduction on mortgage interest. You can also deduct Mortgage Points. A mortgage point refers to one percent of your loan’s value. For a $300,000 loan, you get $3,000 a point, and two points would be $6,000.
Property tax deductions are a local tax that can also be deducted. If you live in a high-property tax neighborhood, this can be a huge tax break. You may or may not be able to take full advantage of this type of deduction on your 2018 taxes, so get all you can now.
Medical-Related Home Improvements
There is a medical home improvements deduction that many homeowners are unaware of, even when they live with aging parents who need additions to the home to keep them safe. With this deduction you can claim anything from the installation of a needed elevator to adding hand grips to the shower stall.
The tricky thing about medical home improvements deductions it that they cannot increase the value of the home. For example, using the elevator scenario: your home’s value will probably increase so you will only be able to deduct the cost minus the increase in the home’s value. However, a hand grip will likely not affect your home’s value much so it will be a full deduction.
This is a common question. Unfortunately, no. Homeowners is a nondeductible expense even if it’s included in your property payments.
However, if you use a part of your home for a business you will be able to deduct a percentage of your mortgage payments and Homeowners Insurance expenses as a deduction. To do this, you’ll need to figure out the square footage of the office or work space (see below: the methods used for homeowners are the same as those for renters).
Can Renters Deduct Rent or Renters Insurance?
Just as with a homeowner, a renter who uses their home for business reasons will be able to make a deduction based on the square footage of the work space. Renters Insurance is tax-deductible if you run a business out of your apartment or rented home. If your employer also requires you to work from home, you can deduct a portion of your rent and Renters Insurance as well. There are a couple of different ways that tax preparers and accountants come up with the deduction amount based on the square footage: the simplified and the regular method. Speak with your accountant to see which one will earn you a bigger deduction. With the Simplified Method you will not need to file a Schedule C whereas the Regular Method requires it.
The information in this article was obtained from various sources. This content is offered for educational purposes only and does not represent contractual agreements, nor is it intended to replace manuals or instructions provided by the manufacturer or the advice of a qualified professional. The definitions, terms, and coverage in a given policy may be different than those suggested here and such policy will be governed by the language contained therein. No warranty or appropriateness for a specific purpose is expressed or implied.