Summertime Tax Tips for Your Home
As a homeowner there are some things that you might consider doing this summer - things that could have a positive impact on this year’s taxes. Here are a few tips.
Keep your home improvement receipts. They may help you avoid taxes when you sell your home. Amounts you spend on improvements to your home, such as installing a new heating system or remodeling your kitchen, increase your home’s basis, which can help you minimize or avoid tax on the increase in your home’s value when you sell it.
Claim a tax credit for adding alternative energy equipment. The federal government offers a 30% tax credit for installing qualified solar, geothermal, wind, and fuel cell equipment in your home. Your state may also offer tax incentives for adding energy-efficient equipment to your home.
Have a vacation home? You may be able to deduct the mortgage interest and real estate taxes you pay on it. If you itemize deductions on your federal tax return, you can generally deduct the interest you pay on up to $1 million of home acquisition debt ($500,000 if married filing separately), provided the loan is secured by your main home or second home. For homes purchased after December 15, 2017, the limit is reduced to $750,000 ($375,000 if married filing separately). Keep in mind that your second home does not need to be a house to qualify for this deduction. It can be a boat, RV, or other type of property that has sleeping, cooking, and toilet facilities.
You may also be able to deduct the real estate taxes you pay on your vacation home. However, the most you can deduct for all state and local taxes you pay, including real estate taxes, is limited to $10,000 or $5,0000 if you are married and file separately.
Earn tax-free income by renting out your home. If you rent out your home for 14 days or less per year, you can pocket the rental income without having to pay tax on it. If you rent for more than 14 days per year, the rental income is taxable, but you can help offset it by deducting your rental expenses.
See also: Financial Tips for Homeowners
If you would like to schedule a strategy session and discuss your specific situation call Davis & Hodgdon at 802.878.1963 (Williston) or 802.775.7132 (Rutland).