Home Ownership and Taxes: Your Guide to Tax Deductions
Saddle up for a two-part series dedicated to helping homeowners, in the Katy, Fulshear, and Houston areas, keep more money in their pockets by maximizing their tax savings.
In part one, we’ll focus on the most common tax deductions available to homeowners, tips to determine whether you should take the itemized or the standard deductions, and resources from the IRS to guide you along the way!
Stay tuned for part two of our “Homeownership and Taxes” series centered around taking control of your rapidly rising property taxes. We’ll take a deep dive into everything homeowners need to know about protesting your property taxes in Fort Bend and Harris Counties; starting with the four most common ways to support your appeal as well as how to navigate each step of the tax protest process.
Together, we will prevail!
Let’s dive into part one, shall we?
Your Breaks and Benefits: The Most Common Tax Write-Offs for Homeowners
There isn’t much about taxes that gets people excited, except when it comes to the topic of deductions. Am I right?
Tax deductions are certain expenses you incur throughout the tax year that you can subtract from your taxable income, thus lowering the amount of money you pay taxes on. There are two tax deductions that most homeowners can take advantage of to reduce their tax liabilities.
Understanding Tax Deductions vs. Tax Credits
Before we get into the nitty-gritty of tax deductions, let's talk about the difference between tax deductions and tax credits.
Tax deductions are expenses that you can subtract from your taxable income, which in turn reduces your taxable income. Tax credits are dollar-for-dollar reductions in the amount of taxes that you have to pay.
Standard Deduction vs. Itemized Deduction: Which option is best for you?
When it comes to tax deductions for homeowners, one of the biggest decisions you'll need to make is whether to take the standard deduction or to itemize your deductions. The standard deduction is a fixed amount that you can deduct from your taxable income. Depending on your financial circumstances, the itemized deduction can allow you to deduct a larger amount than the standard deduction allows.
Which option is best for you? The standard deduction lowers your income by one fixed amount. On the other hand, itemized deductions are made up of a list of eligible expenses.
To figure out which one is best for you, do the math! If your mortgage interest and property taxes add up to more than the standard deduction, it may be worth itemizing your deductions. However, if your expenses are lower than what the standard deduction provides, it’s more beneficial to take the standard deduction.
That said, it’s important to consult with a tax professional to determine the best tax strategy for maximizing your tax deductions. You can learn more about the ins and outs of the standard deduction vs the itemized deduction HERE.
The Most Common Federal Tax Write-Offs for Texas Homeowners
Mortgage Interest Deduction: The mortgage interest deduction is perhaps the most well-known tax benefit available to homeowners. This itemized deduction allows homeowners to deduct the interest
paid on their mortgage from their taxable income, lowering the amount of taxes they owe. This deduction can also be taken on loans for second homes as long as it stays within IRS limits.
is more information from the IRS about Mortgage Interest Deductions.
Property Tax Deduction: In Texas, property taxes can be a significant expense for homeowners. However, did you know that you can deduct property taxes paid on your primary residence and any other properties you own?
Homeowners can deduct property taxes paid on their primary residence and any other properties they own, up to a limit of $10,000 for married couples filing jointly or $5,000 for individuals or married couples filing separately. The specific amount you can deduct will depend on your location and marital status.
is more information on deductible real estate taxes.
The Bottom Line
Determining which way you file your taxes is crucial as it directly correlates with the types of homeowner tax breaks that you can take advantage of. It’s important to consult with a tax professional to determine the best tax strategy for maximizing your tax deductions.
Visit the "Tax Resources" section below for detailed information on all of the potential deductions that are available to you!
My goal is to be your resource for all matters of home and real estate in the Katy, Fulshear, and greater Houston areas. I am committed to helping buyers and sellers make informed decisions based on their unique circumstances and to helping homeowners maximize the full benefits of home ownership.
Stay tuned for part two of our “Homeownership and Taxes” series: The Tax Battle, Winning Strategies for Challenging Your Property Taxes in Harris and Fort Bend Counties.
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if you have any questions about buying a new home, selling your existing home, or need a resource to help you maximize the benefits of owning a home!