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Janna Herron: This is taxes made simple by Yahoo Finance and TurboTax. I'm Janna Herron.
In this episode, we're going to talk about tax tips for homeowners. If you own a home, there are several tax breaks that you want to be aware of. These breaks may mean that you no longer take the standard deduction like you used to and instead have to itemize your taxes, which can be a little bit more complicated. Let's go over some of these tax breaks.
One of the biggest tax deductions for homeowners who itemized their tax returns is the mortgage interest deduction. What does this mean? Your monthly mortgage payment goes to principal taxes and interest that you pay on your home loan. You can deduct that interest that you paid during the year up to a certain limit and that will help reduce your taxable income. There are limits, however, you can deduct the interest on up to $750,000 of mortgage debt or $375,000 if you're married and filing separately,
You may also deduct interest that you pay on a home equity loan or line of credit. As long as the funds that you get from the line of credit or loan are used for home improvements. If you use those funds for other purposes such as paying college tuition or paying down debt, that interest is no longer deductible. If you bought discount points when you took out your mortgage, that may also be deductible depending on how much you've already deducted for mortgage interest. Another break that homeowners get is a deduction on their property taxes. You can also get a tax break for your property taxes. You can deduct up to $10,000 a property taxes along with state and local income taxes on your returns. If you pay mortgage insurance premiums, this is something that first time home buyers might have to pay if they don't put 20% down towards their home purchase.
So if you pay these monthly mortgage insurance premiums that are also deductible, the amount you can deduct may be reduced. If your adjusted gross income is more than a hundred thousand dollars. Though if you made certain energy-efficient upgrades to your home last year, he may qualify for a credit worth up to $500. If you're looking to deduct medical expenses, one of the things that you can include is the installation of healthcare equipment or other medically necessary home improvements that you made last year. Typically you can deduct medical expenses if the total expenses exceed 7.5% of your adjusted gross income. Healthcare improvements may include instructing entrance ramps, making doorways wider, or installing railings or bars in your home, another home-related tax break could be home expenses. So if you work from home as a self-employed person or a contractor, you may be able to duck certain home office expenses such as utilities, um, and space from your tax returns.
Another tax break that doesn't really show up on your tax returns, but still is very important for first time home buyers. First time home buyers can withdrawal up to $10,000 from their IRA individual retirement account penalty-free as long as they use those funds towards a down payment on their home. Typically, if you withdraw from your IRA before your retirement years, you would be assessed a 10% penalty. If you end up selling your home. In many cases, you can collect those profits tax-free. You had to have lived in the home for at least two of the previous five years before you sold the home. The limit is up to $500,000 for married couples and $250,000 for single taxpayers. Another unfortunate tax break is for people who have lost their homes to foreclosure or short sales. Typically, if a lender forgives any of your mortgage debt, that amount is taxable income, but Congress changed those rules for the 2019 tax year, so if you lost your home in foreclosure or how to sell it for less than what your home is worth than the amount that the lender forgave is not taxable. If you're a new homeowner, definitely check into the different deductions, credits, and other tax breaks that are available to you. This may mean doing your tax returns this year is a lot different than previous years. That's all for tax tips for homeowners.
This is taxes made simple from Yahoo finance and turbo tax. Please head over to Apple podcasts and leave a five-star rating and review there. Until next time, thanks for listening.