Tax Advantages Every Homeowner Can Use
As a homeowner, knowing what tax advantages you can have makes a big difference. But often these are things you never needed to know, prior, and probably haven’t needed to research. It can seem like a great deal of complicated paperwork, but if it’s a large investment, it’s worth looking into. So, what tax advantages are out there? How can they benefit you as a homeowner?
Tax Advantages Every Homeowner Can Use: Capital Gains Exemptions
In order to get this exemption, the home needs to be your primary residence, and you have to live there for more than two out of five years. But, avoiding capital gains tax is always nice! If you sell your home, you can exclude up to 250k (or 500k if married). This means that the amount of “gains” (i.e. the amount that you made from selling the house) doesn’t get taxed because you’re in the process of purchasing another property.
Energy Efficient Deductions
There’s a tax credit in force until 2023 for those homeowners who install solar panels on their homes. These tax credits can save you 26 percent of the solar system cost. It has a rollover factor that might make it possible to continue to use the credits after that date if they are installed, grandfathering in the credit’s benefits. Likewise, your state might have some additional options that bring down the cost further, so make sure to look into that as well!
Tax Advantages Every Homeowner Can Use: Home Office Deduction
If, like thousands of workers in 2020, you had a need to work from home for an extended period and establish a home office, you might also qualify for this tax benefit. There is a simplified deduction which allows a deduction of $5 per square foot of space used in the home as a home office, to a maximum of $1500. However, if you do choose to claim your home as a place of business, check with your tax preparer, as it might cancel out the capital gains tax mentioned above.
The tax code can seem super complex, especially when it comes to home ownership, but do not despair! As with all things, there are specialists who can help with all of these aspects, and help you know which things you qualify for using. For now, determine if you’re interested in having solar panels installed and whether you need to claim the home office deduction. And, if you need to sell in the future, that’s when the capital gains exemption applies.
Read this next: 3 Challenges You’ll Have to Deal with in Real Estate Investing
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