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Home ownership can bring about lots of new changes. Your weekends are now spent painting, decorating, working in the yard, making home repairs or knocking out other items on your to-do list. One other change that typically does not get talked about as often involves your taxes.
Once you become a homeowner, your tax situation instantly becomes more complex. While this may seem a little daunting, it is nothing that tax professionals have not seen before, so it may be time to consult an expert if you have never done so in the past. Even though your yearly taxes may take a little more time and effort, homeownership also comes with a few perks in this department. As a homeowner, there are several tax write-offs that you should take advantage of.
Mortgage Interest
Along with a monthly mortgage payment also comes a large amount that goes toward the interest of the loan. Fortunately, this interest also leads to the most significant tax break for homeowners. The vast majority of homeowners are able to claim 100% of their mortgage interest as a deduction (unless the loan is over $1 million). For those who own more than one property, like a vacation home or an RV, the mortgage interest on additional properties can also be written off as long as it is not considered to be a residential rental property.
This is also important to keep in mind if you plan on refinancing in the near future. If you get a lower interest rate or shorten the length of the loan, then you will be paying less interest. However, this also means that you will also have a smaller write-off on your taxes.
Home Renovations
Not only does remodeling give a house a fresh look, but certain home renovations can also qualify homeowners for tax credits. Particularly, remodeling projects that increase the energy efficiency of a home can be used as tax write-offs. Installing items like tankless water heaters, solar energy systems, insulation and new windows can save homeowners on their taxes. Check out the ENERGY STAR website to learn more about the available tax credits.
With a little research and some assistance from a tax professional, homeowners can easily take advantage of these popular tax write-offs.