Spring is vibrant, and summer is fun. But tax season could be the Kindest of them all. As a homeowner, you may qualify for numerous tax deductions *, which means money back in your tax return. And who wouldn’t want to have that?! Uncle Sam is hooking homeowners up with a variety of potential deductions. These tax deductions can vary across home improvement expenses, insurance payments, claims on the house, and whether you’re a first-time homebuyer. Let’s break down the ways tax season can be a whole lot Kinder thanks to homeownership.
Home Improvement Expenses
Channel your inner Bob Villa. Did you know that some home improvements can be deductible on your taxes? * Check out some options for upgrades to your home that can save you some green (& make those new neighbors green with envy):
Mortgage Interest Deduction
The interest paid towards your home loan can be counted in an itemized deduction. Currently the mortgage interest deduction stands at $750,000 for homes you’ve bought, built, or sought financing for home improvements. You’ll want to check in with a tax professional to determine if the standard deductions or itemized deductions will save you more.
Property Tax Deduction
As a homeowner, you’ll pay both state and federal property taxes. “Score! I get to pay more taxes,” said no one ever. The silver lining is that these taxes may be deductible. For itemized deductions, the maximum you can claim is $10,000 (or $5,00 if you’re married and filing separately). If you’re opting for standard deductions, the amount adjusts with inflation. You’ll receive a statement from the government biannually, so make sure to keep that for tax time. Those who pay through an escrow account will likely receive a 1098 statement listing the amount paid.
At times, lenders will require Private Mortgage Insurance, or PMI, to be added to monthly payments as a protection in case the borrower were unable to pay their mortgage payment. For example, if a borrower doesn’t have a 20% down payment, PMI may be required. If you’re opting to itemize, you may include your PMI payments on your annual taxes. (Note: PMI tax deductibility for 2022 and beyond has not been extended as of 07/01/2022, but historically it gets extended every year.)
Tax Breaks for First-Time Homebuyers
Uncle Sam wants you…to get into a home. Additional incentives are available for first-time homebuyers. For example, the IRS allows a $10,000 deduction from your traditional or Roth IRA account to finance your first home without paying the 10% penalty, however you will still have to pay regular income tax on the withdrawal. Additional government agencies offer incentives for first-time homebuyers.
Want to know more about qualifying for tax incentive programs and the numerous benefits of homeownership? Stop the scrolling and connect with a knowledgeable Kind Ambassador to discuss your unique goals and situation. Make next tax season Kinder with the numerous tax deductions available to you as a homeowner.
*References to tax deductibility are based on generally available information and are not proposed as expert tax or legal advice. Each consumer’s situation is different. You should consult a professional tax or investment adviser for advice based on your particular financial situation before making any final decision based on the information contained herein.