Maximize Your Savings: 5 Tax Benefits of Owning a Home

Here’s a question that a lot of home owners and potential home owners have occasion to ask: How does owning a home help with taxes? The tax benefits of owning a home can be substantial. Home ownership can end up saving you money on pricey things like mortgage interest, property taxes, and more. Here we’ve compiled five tax benefits of owning a home in 2023.

Please note that we are not tax advisors and the information provided in this blog post is not intended to be and should not be construed as tax advice. You should consult with a qualified tax professional before making any decisions related to taxes or the tax advantages of buying a home.

5 Tax Benefits of Home Ownership

Owning a home may mean you qualify for several tax benefits you probably won’t want to miss out on. But what exactly are the specific tax benefits of owning a house?

Home ownership means you’ll be able to deduct mortgage interest and property taxes, qualify for capital gains exclusions, take advantage of the home office deduction, and is the first step to being eligible for energy efficiency tax credits. Let’s dive into the details.

1. Mortgage Interest Deduction

The mortgage interest deduction is one of the more significant tax benefits of owning a home. This deduction allows homeowners to deduct the interest they pay on their mortgage from their taxable income. The deduction applies to both primary residences and second homes, as well as mortgages used to purchase, build, or improve a home.

The amount of mortgage interest you can deduct depends on the size of your mortgage and the interest rate you pay. In general, the early years of homeownership are when you will see the most significant tax savings from this deduction, as the majority of your mortgage payment goes towards interest in the first few years.

2. Property Tax Deduction

In addition to the mortgage interest deduction, homeowners can also deduct their property taxes from their taxable income. This deduction applies to any property taxes paid on a primary residence or second home. With this in mind, property tax deductions can be one of the more enticing tax benefits of owning a house.

The amount of property taxes you can deduct depends on the property tax rate in your area and the value of your home. There is no cap on this deduction, so you can deduct the full amount of property taxes you pay each year. When it comes to the tax benefits of owning a home, property tax deduction is something you definitely don’t want to miss out on.

3. Capital Gains Exclusion

If you decide to sell your home, you may be eligible for a capital gains exclusion. This means that you can exclude up to $250,000 of capital gains from the sale of your home if you are single, and up to $500,000 if you are married and filing jointly. To qualify for this exclusion, you must have lived in the home as your primary residence for at least two of the five years before you sell it.

This exclusion can result in significant tax savings for homeowners, especially if they have owned their home for a long time and have seen significant appreciation in its value. However, if you sell your home for more than the exclusion amount, you will need to pay capital gains taxes on the excess amount.

4. Home Office Deduction

The tax advantages of buying a home you plan to work from will bring you even more savings. That’s because if you work from home, you may be able to take advantage of the home office deduction. This deduction allows you to deduct a portion of your home expenses, including mortgage interest, property taxes, and utilities, based on the percentage of your home that you use for business purposes.

To qualify for this deduction, you must use a portion of your home exclusively and regularly for business purposes. The amount you can deduct depends on the size of your home office and the percentage of your home that it represents. It is worth noting that this deduction is also available to renters.

5. Energy Efficiency Tax Credits

Finally, homeownership may also make you eligible for energy efficiency tax credits. The tax advantages of buying a home that is energy-efficient can be amazing, but homeowners need to make qualifying upgrades to reap the rewards. This type of tax credit is only available to homeowners who make certain energy-efficient upgrades to their homes, such as installing solar panels, geothermal heat pumps, or energy-efficient windows and doors.

The tax credits can help offset the cost of these upgrades and provide additional tax savings for homeowners. The amount of the tax credit will depend on the type of upgrade and its cost.

Are The Tax Benefits of Owning a Home Worth It?

Now that you understand some of the tax advantages of buying a home, it may be time to decide if it’s worth it in your case. Evaluating whether the tax benefits of owning a home are worth it or not in your situation will hinge on a variety of factors. These factors may include your financial situation, the state of the housing market, average rent in your area, etc. Whenever evaluating the tax benefits of owning a home vs. selling, it’s wise to take all relevant factors into account.

Selling Your Home to Upward Home Solutions

While the tax benefits of owning a home can be great, sometimes selling is the move. If you are looking to sell your home quickly and without the hassle of traditional home selling methods, selling to Upward Home Solutions may be a good option for you. Upward Home Solutions is an all-cash home-buying company that can provide you with a fair cash offer for your home in as little as 24 hours.

When you sell your home to Upward Home Solutions, you can avoid the costly repairs, commissions, and closing costs associated with traditional home selling methods. Additionally, because Upward Home Solutions buys homes in as-is condition, you do not need to worry about making any repairs or upgrades to your home before selling it.