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New Home and Taxes

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Homeownership comes with huge tax advantages.  There have been changes recently in upper limits eligible for deductions, but the caps are still high enough that the majority of homeowners can deduct up to the maximum tax rate on their property. These tax advantages are:

  • Mortgage interest deduction
  • Property tax deduction
  • Mortgage points
  • Private mortgage insurance (PMI)
  • Energy-efficient upgrades
  • Aging-in-place deduction
  • Selling the home

Mortgage Interest

The entire amount of interest you pay on a mortgage can be deducted up to the amount of $750,000. You can also deduct interest paid on a home equity line of credit (HELOC) if the total of the home mortgage plus the HELOC falls under the $750,000 cap.

Property Tax

Property taxes are deductible up to the maximum of $10,000. You can also deduct any taxes you reimbursed to the seller if they prepaid it while owning the property.

Mortgage Points

Mortgage points can be deducted for the entire life of the loan. If you paid the lender points when you took out your mortgage or refinanced it, you are able to take advantage of this deduction.

Points are normally expressed as a percentage of the loan. Therefore, if each point is 1.5% and your loan is for $300,000, each point would cost $4,500. This benefit really helps if you also have a HELOC or have refinanced the loan. The way this works is a fractional amount of the mortgage payment each month goes to points. So, if the payment for points is $15 of your payment, at the end of the year, you could deduct $180.

Private Mortgage Insurance

If you put less than 20% down on your home, private mortgage insurance (PMI) is a fee that must be paid to the lender. This fee is to protect the lender should the borrower default on the loan. PMI can only be claimed if your adjusted gross income is $100,000 or less if married, and $50,000 or less if single.

Energy Efficient Upgrades

Most of the tax incentives for making energy-efficient upgrades for your home have disappeared. You can still claim tax deductions on solar energy used for both electric- and water-heating equipment through 2021, but hurry because there is a sliding scale that diminishes the percentage of adjustment that can be made through December 31, 2021, at which point the incentive will end if not reinstated.

Aging in Place

The tax code currently allows people who wish to remain in their residence as long as they can to deduct any expenditures put forth to make it possible for them to live in comfort right where they are. Some examples of this would be a walk-in tub, wheelchair ramps, grip bars and electric lifts for stairways.

Selling the Home

So, if you don’t want to age in place but wish to sell your home and try a different living situation, there is a deduction for you, too, called the home sale exclusion. This comes in if you have lived in your primary residence for two out of five years before you sell it. When you do sell it, you are excluded from paying taxes on any profits you make up to $500,000 if married, and $250,000 if single.

For example, if you buy a home for $200,000 and live it for six years, over those six years, you have made $50,000 worth of home improvement projects bringing your investment in the home to $250,000. When you sell it, you are in a surging home market and you sell it for $350,000 for a profit of $100,000; none of that profit is taxable.

The advantages of homeownership far outweigh the disadvantages in so many different ways. If you are looking to reap the benefits of owning your own residence for the first time or looking to relocate, look no further than the attractive, livable communities built by Landmark 24 Homes in Georgia and South Carolina. Landmark 24 communities offer such a wide variety of floor plans and home models that there truly is a home suitable to everyone’s lifestyle and design sensibilities.

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