How the Inflation Reduction Act Will Help Homeowners This Tax Season

Deductions and Tax Credits Allow Homeowners to Keep More Money In Their Pockets

It’s no secret: we’re all experiencing higher costs and the impact of rising inflation.

The good news is that the recent Inflation Reduction Act includes some adjustments that can help taxpayers save money for the 2023 tax year.

You’ll be able to keep more of your income with the new tax rate schedules, which raised the income thresholds for tax brackets. And it gets even better since the IRS also increased the standard deduction for married couples and those filing individually — the largest adjustments to deductions since 1985.

If you own a home, there are additional tax benefits you can take advantage of, so let’s take a look at them.

Homeowner Tax Breaks

Whether it’s deductions or tax credits specifically for homeowners, you have the opportunity to keep more money in your pocket when you own a home.

Of course, you want to consult with your own tax advisor for personal tax advice but this is a good starting-point.

• Mortgage interest. Interest paid on home loans is deductible up to $750,000 for a principal residence plus a second home.  This can mean up to hundreds, maybe even thousands of dollars in tax savings every year.  Ask your tax advisor what that savings could be for you since it varies depending on factors like your tax bracket, mortgage amount, etc.
• Property taxes. Property taxes on all real estate are fully deductible. That means even more tax savings, and more money you could keep in your pocket. 

• Credit for green improvements. Not a tax break but a credit. Allows homeowners to take up to $500 off their federal income tax for making certain improvements that increase the energy efficiency of their homes, such as water heaters, furnace, boiler, heat pump, windows, or roofing.  Currently, this tax credit is approved through 2023.

• Investment Property/Rental Property. The cost of maintaining and marketing a rental property can be deducted from the income the property generates, without regard to the owner’s tax status. These expenses include mortgage interest payments, insurance, utilities, maintenance, repairs, advertising costs and management fees, as well as the non-cash cost of depreciation.

• Home office. You can deduct the costs of a home office that you use exclusively as your principal place of business. Since many of you may have started working from home in recent years, make sure you know the specifics to get any deductions.

• Tax-free rental income. If you rent your primary home for 14 or fewer days during the year, the rental income is tax-free.

These are just some of the ways being a homeowner helps you save money!

I’m Here to Help

Please reach out to me with any questions when it comes to your home. And if you’d like to get more details about any of the homeowner tax perks discussed above, reach out to a Certified Public Accountant. If you need a recommendation, I’d be happy to suggest someone to work with you.

If you know anyone who is thinking about buying a home, I’d love to help them.  I like to start with a get-to-know-you conversation and to walk through the entire process of buying a home well before we start looking at homes. I’d be grateful for your referral.