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    Real Estate you should know

    Are You Missing Out on Homeowner Tax Breaks?

    Are you a property owner looking for ways to reduce your annual tax burden? These homeowner tax incentives can help lower...

    • Susana Murphy
    • March 14th, 2023
    • 5 min read

    Are you a property owner looking for ways to reduce your annual tax burden? These homeowner tax incentives can help lower your taxable income and result in huge savings when filing. In this article, we’ll discuss the most common homeowner tax incentives that could benefit you this year.

    Homeowner tax breaks that will save you money

    The interest you paid on your mortgage

    For homeowners who itemize, the interest paid on your mortgage is usually a pretty hefty tax deduction. This amount depends on when you took out your loan: if it was after Dec. 16, 2017, you can deduct up to $750,000 (or up to $375,000 if married and filing separately); for loans taken out between Oct. 14, 1987, and Dec. 15, 2017, you can deduct up to $1 million ($500,000 if married and filing separately); and for refinanced mortgages, the limit depends on the origination date of your first loan. All interest may be deductible if your loan predates Oct. 14th, 1987.

    What you paid for discount points

    If you’re within the limit to deduct all your mortgage interest, you may also deduct the discount points you paid when the loan closed. Discount points can lower the mortgage's interest rate and cost 1% of the total mortgage amount. It is important to note that there are other types of fees called "loan origination points" which do not qualify for a deduction—instead, these go toward covering lenders' costs in providing loans.

    Some renovation costs—especially medically-necessary improvements

    When determining your medical expense deductions, you may include the cost of installing healthcare equipment or other medically-required home improvements that benefit you and your household. However, permanent improvements that increase the value of your home are only partially deductible; the amount must be subtracted from your increased property value. In contrast, many modifications that make a home more accessible (building entrance ramps, wide doorways, railings, and support bars) do not raise a property’s worth and can be fully deducted.

    Home office expenses

    If you’re self-employed and use part of your home regularly and exclusively for business purposes, you may be eligible to deduct home office expenses. The IRS website provides information on how to determine if your space qualifies for a tax deduction as well as worksheets for calculating the amount. You can choose either the "simplified method" or calculate your actual expenses when figuring out the deduction.

    Property taxes

    You may deduct a maximum of $10,000 ($5,000 if married and filing separately) for the combination of property taxes, state, and local income taxes, or sales taxes when filing your personal income taxes.

    What you need to know about multi-family residence deductions

    People who purchase and operate rental properties can take advantage of various tax deductions that differ from those available for a primary residence owned by the homeowner. 

    These include:

    Asset depreciation

    Depreciation is a unique tax benefit of rental property. According to the Internal Revenue Service (IRS), residential property has a depreciable lifespan of 27.5 years, while non-residential real estate has a depreciable lifespan of 39 years. This allowance is provided for expected wear and tear or obsolescence when owning the property over time. Furthermore, larger purchases like appliances or furniture may also be depreciated by owners over the item’s lifetime.

    Repairs

    Repairs to rental properties are generally deductible on tax returns. This includes fixing a broken banister or replacing a damaged garage door. However, upgrades and improvements such as adding a new shed or remodeling a bathroom are not considered repairs, but they can be depreciated over the useful life of the property. If you provide tenants with rental credits in exchange for performing repairs, this credit can also be deducted as an expense even though it will be considered income.

    Operating expenses

    Expenses related to tenant screening, such as background checks, credit reports, and reference checks are generally deductible. Other costs associated with the upkeep of the property or landlord-paid utilities may also be eligible for deduction. These expenses can include lawn care, painting, appliance maintenance and repairs, carpet cleaning, pest control, and seasonal maintenance (gutter cleanings, tree pruning, snow removal, etc.) as well as your Homeowners' Association dues.

    Is it worth the trouble to claim these tax breaks?

    For homeowners, tax deductions can amount to thousands of dollars. However, it is only worth itemizing if the sum of all your deductions exceeds the Internal Revenue Service's (IRS) standard deduction for the 2022 tax year. The standard deduction amounts are as follows: $25,900 for married couples filing jointly; $12,950 for single filers and married individuals filing separately; and $19,400 for heads of households.

    Looking for more tips?

    If you're uncertain of the steps to take or need advice tailored to your situation, our team is here for you. Our ALANTE agents are knowledgeable about the intricacies of our current market and can answer any questions you have.

    Get in touch

    Author Photo
    About the author

    Susana Murphy

    508-345-5632
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    I'm Susana Murphy, and I founded ALANTE with a clear vision and a passion for redefining what real estate should be. Let me share with you why ALANTE exists, what we stand for, and what we aim to offer both our valued clients and our dedicated agents. ALANTE Real Estate wasn't just a business venture for me—it was a calling born out of a deep-seated belief in doing things differently, and doing them better. Having been in the real estate industry since 2005 myself as a top producing Realtor, I saw firsthand the immense potential for innovation and improvement. I recognized that traditional practices were falling short in meeting the evolving needs of clients and agents alike. My vision for ALANTE was simple yet profound: to elevate the real estate experience by combining cutting-edge technology combined with story driven marketing and timeless values. In an industry often defined by transactions, I wanted to focus on service. I wanted to create a space where clients felt heard, valued, and supported every step of the way, and where agents could thrive in an environment that prioritizes collaboration, growth, support and integrity. At ALANTE, we believe in offering our clients more than just transactions—we offer them transformative experiences. We understand that buying or selling a home is not just a financial decision; it's an emotional journey filled with dreams, aspirations, and life-changing moments. That's why we approach each interaction with empathy, expertise, and a genuine desire to exceed expectations. For our agents, ALANTE is more than just a brokerage—it's a community of like-minded professionals committed to excellence. We provide our agents with the tools, training, and support they need to succeed, all while fostering a culture of mutual respect, collaboration, and continuous learning. We believe that empowered agents create exceptional experiences for our clients, and that belief is at the core of everything we do. In an industry that's constantly evolving, we remain steadfast in our commitment to innovation and adaptability. We embrace technology not as a replacement for human connection, but as a catalyst for enhancing it. From advanced marketing strategies to streamlined processes, we leverage technology to enhance efficiency, transparency, and results. We don't just meet industry standards—we set new ones. We believe in raising the bar and redefining what it means to be a leader in real estate. Our dedication to excellence, integrity, and client satisfaction sets us apart, and it's what drives us to continually push boundaries and exceed expectations. So, whether you're a client looking for a personalized, unparalleled real estate experience or an agent seeking a supportive, forward-thinking brokerage, we invite you to join us on this extraordinary journey. Together, we're not just reimagining real estate—we're elevating it to new heights. Welcome to ALANTE Real Estate, where your vision meets our passion.

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