As a homeowner, it is essential to be aware of the various tax deductions, programs, and housing allowances in which you may be eligible. These can significantly reduce your tax burden and make homeownership more affordable. The Internal Revenue Service (IRS) encourages all homeowners to review these house-related deductions and programs, particularly during the summer months, which are a popular time for buying or selling homes.
Most homeowners take out a mortgage loan to buy their home and then make monthly payments to the mortgage holder. These payments often include several costs associated with owning a home. The costs that homeowners can deduct include state and local real estate taxes, subject to a $10,000 limit, and home mortgage interest, within the allowed limits. However, to deduct these homeownership expenses, taxpayers must itemize their deductions. It is important to note that homeowners cannot deduct insurance costs, the amount applied to reduce the principal of the mortgage, wages paid to domestic help, depreciation, utility costs, most settlement or closing costs, forfeited deposits, down payments, earnest money, internet or Wi-Fi system or service, homeowners’ association fees, condominium association fees, common charges, or home repairs.
The IRS also highlights the Mortgage Interest Credit, which helps people with lower income afford homeownership. Those who qualify can claim the credit each year for part of the home mortgage interest paid. Furthermore, the Homeowners Assistance Fund program provides financial assistance to eligible homeowners for paying certain expenses related to their principal residence to prevent mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services, and displacements of homeowners experiencing financial hardship after Jan. 21, 2020. Lastly, ministers and members of the uniformed services who receive a non-taxable housing allowance can still deduct their real estate taxes and home mortgage interest without reducing their deductions based on the allowance.
Source: https://www.irs.gov/homeowners-review
