Marino & Marino, P.C. Source: massrealestatenews.comFrom experience being in the real estate industry for nearly forty years, it is not uncommon for homeowners to miss tax deductions when not using a professional accountant. Not having a tax advisor can be a mistake. You can easily miss out on tax breaks. We will examine what you should know so you don’t miss out on these money savers.
Are you looking for the ultimate list of tax deductions for Massachusetts homeowners in 2024? Would you like to unlock hidden savings? Well, you have come to the right place!
Tax deductions for homeowners are not hidden treasures. They’re just simple savings tucked within your annual financial duties.
These refunds come into play when you itemize your deductions using Schedule A of Form 1040, replacing the standard deduction.
Often, this involves claiming benefits like mortgage interest on your primary or secondary home and property taxes paid throughout the year.
Knowing this, a whole world of potential savings emerges. Isn’t it time to set sail into these uncharted financial seas? Remember, every journey starts at the dock. Let’s cast off by determining if you qualify for these deductions.
As a first-timer, it is essential to know that buying a home offers more than a roof over your head. There are significant benefits vs. paying rent.
ESSENTIAL FACTS AND STATISTICS TO KNOW
Homeowners can deduct mortgage interest paid on their primary residence from their taxable income.
Property tax deductions allow owners to reduce their tax liability based on the amount of property taxes paid.
You may be eligible to deduct certain home improvement expenses, such as energy-efficient upgrades, from your taxes.
Deductions for home office expenses are available to those who use a portion of their house exclusively for business purposes.
Some Massachusetts owners may qualify for a capital gains exclusion when selling their primary residence, excluding a portion of the gain from being taxed.
Homeowners in the United States can deduct up to $10,000 yearly in state and local taxes.
Approximately 70% of property owners are eligible for mortgage interest deductions on their tax returns.
Homeowners, on average, save over $1,200 per year through property tax deductions.
Energy-efficient home improvements can result in a tax credit of up to 30% of the total costs.
More than 80% of property owners who utilize home office spaces are eligible for deductions on related expenses.
STANDARD VS. ITEMIZED DEDUCTIONS
Before examining the deductions applicable to Massachusetts homeowners, it is crucial to grasp the contrast between standard and itemized deductions.
Both categories of deductions can decrease your total income tax liability by reducing your taxable income.
The Internal Revenue Service (IRS) provides the standard deduction to all tax filers. For the year 2024, the standard deduction is as follows:
For individuals filing taxes separately, whether single or married, the standard deduction is $14,600.
For married couples filing jointly, the standard deduction is $29,200.
For heads of households, the standard deduction is $21,900.
You can lower your taxable income by a set amount when you choose the standard deduction. If you itemize deductions, you will not benefit from the standard deduction.
Instead, the total of your itemized deductions will decrease your taxable income and reduce your tax liability.
If you are considering utilizing tax deductions as a Massachusetts homeowner, ensure that your itemized deductions exceed the standard deduction in total amount.
ELIGIBILITY FOR HOMEOWNER TAX DEDUCTIONS IN MASSACHUSETTS
The process can be slightly different when claiming homeowner tax deductions compared to the standard deduction. Individuals must itemize these deductions using Schedule A of Form 1040 to claim them.
This means you list each deductible expense separately on your tax return rather than taking the standard deduction.
This method can benefit homeowners with significant deductible expenses, such as mortgage interest, property taxes, and other homeownership-related costs. However, ensuring you’re claiming everything correctly takes more effort and documentation.
In addition to itemizing deductions, homeowners in Massachusetts should ensure they have valid ownership of the property and meet any specific criteria set by the IRS to qualify for these deductions.
This might include residency requirements and certain restrictions on the type of property being claimed for deductions.
For instance, there are specific rules around claiming mortgage interest deduction. Massachusetts homeowners can deduct all payments for mortgage interest on the first $750,000 of their mortgage debt.
Ensuring that your mortgage fits these criteria is an essential aspect of eligibility.
It’s like ensuring you have all the right ingredients before cooking your favorite meal. It would help if you had everything in place to get the best results or, in this case, maximum tax savings.
We will aim to provide a detailed guide to eligibility criteria and help homeowners understand if they qualify for these deductions.
Homeowners can confidently navigate the eligibility requirements by breaking down complex IRS regulations into simple, easy-to-understand information.
Understanding the eligibility criteria for homeowner tax deductions sets the stage for homeowners to make informed financial decisions. You’ll be equipped to make the most out of potential savings come tax season.
MORTGAGE INTEREST AND PROPERTY TAX DEDUCTIONS
If you’re a homeowner, you understand the effort it takes to manage your mortgage and property taxes. But did you know that the yearly interest on a mortgage of up to $750,000 can be deducted from your income when filing your taxes?
This mortgage interest deduction (MID) can significantly lower your taxable income. It can potentially move you into a lower tax bracket.
The best part is whether it’s your primary or secondary residence doesn’t matter. You’re all set if it’s a secured debt with the property as collateral.
Let’s break this down a little further. Here’s how it works: If your mortgage was taken out after December 16, 2017, you can deduct the interest paid on the first $750,000 of your mortgage during the relevant tax year ($375,000 for married couples filing separately).
However, if your mortgage was taken out between Oct. 13, 1987, and Dec. 16, 2017, the limit is $1 million or $500,000 for couples filing separately. And there is no cap for mortgages before Oct. 13, 1987!
DON’T FORGET ABOUT DISCOUNT MORTGAGE POINTS
When you got your mortgage, you might have been given the choice to buy discount points to reduce the interest rate on your loan. One discount point will be equivalent to 1% of the mortgage amount.
When points are bought to lower the interest rate on mortgages, the expense of discount points can be deducted.
On the other hand, loan origination points are not eligible for tax deductions as they are fees that do not impact the loan’s interest rate.
Don’t forget this essential tax benefit if you qualify.
WHAT ABOUT PROPERTY TAXES?
Well, homeowners are allowed to deduct their property taxes, too. This includes the property taxes on your primary residence and those on vacation homes.
As a homeowner in Massachusetts, it’s crucial to understand that property taxes will be applicable at both state and local levels.
If you are married and filing jointly, you can deduct up to $10,000 of property taxes, while the deduction is $5,000 for individuals or those married and filing separately.
For many people, this can be a significant tax break.
Understanding the intricacies of mortgage interest and property tax deductions is crucial for homeowners looking to maximize their potential tax savings.
BENEFITS OF HOME IMPROVEMENT AND ENERGY TAX DEDUCTIONS
Every dollar saved makes a difference as a homeowner, and tax deductions for home improvements and energy-efficient upgrades can put money back into your pocket.
By making specific improvements to your home, you enhance its value and functionality and unlock potential long-term savings through tax credits.
Let’s talk about solar panels. Installing solar panels reduces your reliance on traditional energy sources and provides an opportunity for tax benefits.
Homeowners who have invested in solar panel installations may be eligible for a federal solar investment tax credit(ITC). It allows you to claim a certain percentage of the cost of installing the system as a credit against their federal tax liability.
This credit and potential state or local incentives can significantly offset the upfront costs of transitioning to solar energy.
Energy-efficient upgrades such as installing windows, doors, or roofing systems can qualify for tax credits.
When homeowners in Massachusetts make these enhancements to improve the overall energy efficiency of their homes, they may be eligible to claim these expenses as tax deductions. It ultimately contributes to reduced taxable income.
GOING GREEN LOWERS YOUR TAXES AND HELPS THE ENVIRONMENT
Focusing on specific improvements that qualify for tax deductions while highlighting the potential long-term savings can incentivize homeowners to consider these upgrades.
Imagine saving hundreds or even thousands of dollars in reduced taxes while embracing environmentally friendly solutions for your home.
These incentives benefit homeowners financially and support sustainable practices that promote energy conservation and reduce carbon footprints.
It’s a win-win situation where you contribute to a greener future while reaping financial rewards.
By promoting these key benefits on our site, we aim to empower homeowners with valuable information, encouraging them to consider beneficial home improvements and energy-efficient upgrades.
These enhancements add value to their homes and position them to take advantage of significant tax savings. It contributes to your financial well-being and environmental consciousness.
UNVEILING HIDDEN SAVINGS: OTHER DEDUCTIBLE EXPENSES
Beyond the well-known mortgage interest and property tax deductions, numerous other expenses can contribute to significant savings for homeowners.
HOME OFFICE DEDUCTION
One often overlooked deductible expense is home office expenses, particularly relevant to those who operate a business from their homes.
Whether you’re a freelance writer, real estate agent, consultant, or artist, you may be eligible to deduct some of your home-related expenses.
For example, utilities, internet, rent, or mortgage interest could be deducted if you have a dedicated home office space used exclusively for your business.
It’s essential to keep records of all related expenses. You should consult with a tax professional to ensure compliance with IRS regulations.
Keeping precise records of these expenses and seeking expert advice can unlock substantial deductions come tax season.
MORTGAGE INSURANCE PREMIUMS
Another commonly missed tax deduction is mortgage insurance premiums. For many homeowners who purchased their homes with less than a 20% down payment, they are or were previously required to pay mortgage insurance.
The good news is that this premium is tax-deductible for eligible borrowers. This includes premiums paid on FHA loans, USDA loans, and conventional mortgages.
For instance, if you purchased your home after 2006, and your adjusted gross income (AGI) is less than $100,000, you can fully deduct your mortgage insurance premiums.
If your AGI falls between $100,000 and $109,000, there’s a partial deduction available.
MEDICAL HOME IMPROVEMENT TAX BREAK
Moreover, medical home improvements also qualify as deductible expenses under specific conditions. Home improvements required for medical care may be partially deductible if the costs exceed 7.5% of your adjusted gross income.
Such modifications may include installing ramps, widening doorways for wheelchair access, modifying stairways, or adding bathroom handrails due to medical necessity.
Perhaps surprising but essential is that homeowners must remember that not all home-related expenses qualify as deductible.
Costs such as homeowner’s insurance premiums, principal payments on mortgages, title insurance, utilities, and homeowner’s association dues are typically ineligible for tax deductions.
By being aware of these lesser-known deductible expenses and ensuring meticulous record-keeping throughout the year, homeowners can efficiently unlock hidden savings they may have previously overlooked.
Understanding these overlooked tax breaks could significantly impact how much homeowners save when filing yearly taxes.
DON’T FORGET ABOUT REAL ESTATE CAPITAL GAINS
While you won’t realize the capital gains tax break until you sell your home, it’s essential to remember it.
It is important to note that when selling your Massachusetts home for a profit, capital gains tax breaks may apply.
The capital gain is determined by the difference between the home’s value at the time of purchase and at the time of sale.
For instance, if you purchased your home for $500,000 and later sold it for $700,000, you would have a capital gain of $200,000.
If you have used your home as your primary residence for two of the last five years, you may be eligible to retain some profits without incurring any tax obligations.
For married couples filing jointly, the maximum amount of capital gains that can be kept is $500,000. For single filers or married couples filing separately, each party can retain up to $250,000 of capital gains without being subject to tax obligations.
It is crucial that you resided in the house for two of the last five years to qualify. Given the significant tax benefit at stake, adhering to the regulations governing this deduction is essential.
So, in the above example, a homeowner would not owe any taxes because the exclusion is $50,000 higher than the profit.
MAXIMIZING DEDUCTIONS: TIPS FOR HOMEOWNERS IN MASSACHUSETTS
Regarding taxes, several intelligent strategies can help you get the most out of your homeowner benefits. Let’s walk through some tips that can help you maximize your deductions.
1. KEEP DETAILED RECORDS
The more detailed your records are, the easier to claim deductions. Keep receipts for home improvement projects, energy-efficient upgrades, and property taxes.
It might seem tedious initially, but detailed records can save you much money in tax credits and deductions in the long run. Plus, it’s a good habit to keep organized records in case you need them for other reasons.
2. TIME LARGE PURCHASES OR IMPROVEMENTS STRATEGICALLY
Are you planning on making any significant improvements to your home? Perhaps a new roof, solar panels, or an energy-efficient heating system?
Timing these renovations strategically can make a big difference at tax time. For example, purchasing qualifying energy-efficient appliances or making improvements before the end of the tax year can make you eligible for certain tax credits or deductions.
Let’s say you’re considering installing energy-efficient windows.
If you plan and purchase before the end of the year, you may qualify for the Residential Energy Efficient Property Credit. This could lead to a substantial deduction.
3. PLAN CHARITABLE CONTRIBUTIONS STRATEGICALLY
Did you know donating to charity can also bring you some tax benefits? Being strategic with your donations can make a big difference regarding charitable contributions.
If you plan on making charitable contributions, consider timing these donations to coincide with your filing year to maximize potential deductions.
Think of it like planting seeds at just the right time. You can reap a bigger harvest of tax deductions by making thoughtful decisions about when and how much to donate.
4. CONSULT WITH A TAX PROFESSIONAL
Lastly, if all this seems overwhelming or confusing, consulting with a tax professional is always a good idea. They can help guide you through the complexities of homeowner tax benefits. Professionals ensure you’re taking full advantage of every deduction available.
By keeping detailed records, strategically timing large purchases or improvements, planning out charitable contributions, and seeking professional advice if needed, homeowners can make the most of available tax benefits and potentially save a substantial amount on their taxes each year.
Navigating the intricate landscape of homeowner deductions can be overwhelming without the proper guidance.
CONCLUSION
Ultimately, effectively claiming homeowner deductions comes down to attention to detail and proper documentation. Maintaining accurate records of your expenses and ensuring all necessary forms are submitted correctly will maximize your potential for tax savings.
Being diligent and organized in preparing for tax season as a homeowner can unlock a wealth of hidden savings.
Contact Marino & Marino, P.C. and have us assist with your next purchase and ensure you receive the most tax breaks in your favor!