For some homeowners, itemizing simply may not be worth it. So when would itemizing work in your favor? As one example, if you're a married couple who paid $20,000 in mortgage interest and $6,000 in state and local taxes, you would exceed the standard deduction and be able to reduce your taxable income by an additional $2,000 by itemizing.
Homeowners with a mortgage that went into effect before Dec. 15, 2017, can deduct interest on loans up to $1 million.
However, for acquisition debt incurred after Dec. 15, 2017, homeowners can only deduct the interest on the first $750,000.
You should get a statement from your mortgage holder in January that itemized all the costs of your mortgage.
Energy Efficient Upgrades
The Secure Act also retroactively reinstated a $500 deduction for certain qualified energy-efficient upgrades "such as exterior windows, doors, and insulation.
For equipment installed between Jan. 1, 2017, and Dec. 31, 2019, 30% of the expenditures is eligible for the credit. That goes down to 26% for installation between Jan. 1 and Dec. 31, 2020, and then to 22% for installation between Jan. 1 and Dec. 31, 2021.
A Home Office
Understand, however, that there are strict rules on what constitutes a dedicated, fully deductible home office space. Here's more on the much-misunderstood home office tax deduction.
The fine print: If you work from home occasionally but have an office to go to, you can't take this deduction.
Home Improvements that are Age Related
The cost of these improvements can result in a nice tax break for many older homeowners who plan to age in place and add renovations such as wheelchair ramps or grab bars in slippery bathrooms. Deductible improvements might also include widening doorways, lowering cabinets or electrical fixtures, and adding stair lifts.
The fine print: You’ll need a letter from your doctor to prove these changes were medically necessary.
Interest on a Home Equity Line of Credit (HELOC)
In the end, tax laws are complicated. If you have questions, consult a tax expert.
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