Most homeowners know that they canÂ receive certain tax deductions on a home that renters simply canâ€™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. We’re here to tell you how you can claim a sum as a homeowner on taxes. And for those of you who donâ€™t own a home, the great news is that renters can still claim some tax deductions.
Itâ€™s a good time to have Renters Insurance and Homeowners Insurance. If you arenâ€™t yet covered, call an Insurance Specialist who can explain your options at (855) 247-5289.
HomeownersÂ & Mortgage Points
In order to claim tax deductions you first have to forgo the standard one. That is $6,350 for single filers and $12,700 for married filers. Also, know that in 2018, standard tax deductions will be almost twice what they are for 2017! Itâ€™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 in deductions on mortgage interest. You can also deduct Mortgage Points. A mortgage point refers to one percent of your loanâ€™s value. For a $300,000 loan, you get $3,000 a point. 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. DoÂ you live with aging parents who need additions in your home to keep them safe? Then, you may qualify for this tax deduction. 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, your homeâ€™s value will probably increase if you install an elevator.Â Therefore,Â you will only be able to deduct the cost minus the increase in the homeâ€™s value. However, a hand grip will likely not affect your homeâ€™s value much, so it will be a full deduction.
Is My Homeowners Insurance Tax Deductible?
This is a common question. Unfortunately, the answer is no. Homeowners Insurance is a nondeductible expense even if itâ€™s included in your property payments. However, if you use a part of your homeÂ as a business, youÂ can use a percentage of your mortgage payments and Homeowners Insurance expenses as a tax deduction. To do this, youâ€™ll need to figure out the square footage of the office or work space. The methods used for homeowners are the same as those for renters, as seen below.
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.