Unlocking Tax Benefits: Make Your Home Work for You
How Your Home Could Impact Tax Day
As we get closer and closer to April 15th, Tax day in America, you may be wondering what options there are for tax benefits regarding your home. Now it is important to note that no one on the Weinland Team is a tax expert or CPA, myself included. Majority of us utilize our own tax professionals. And depending on your own individual circumstances, I would most likely recommend you do the same to ensure you are taxing full advantage of any tax benefits. That said though, there are several things to think about in terms of tax benefits with homeownership.
Tax Benefits for Owning a Home
Some tax advantages of owning a home could consist of the following: mortgage interest, real estate taxes, discount points, private mortgage insurance, home office deductions, medically necessary home improvements, home sale, moving expenses, and energy efficiency. There may be more, and in no way should this be considered an all encompassing list.
Mortgage Insurance
Many buyers who put down less than 20% have some form of mortgage insurance. While paying that balance down would be a better way of saving money, using it as a tax benefit until then would be the next best thing. I certainly wouldn’t recommend that you carry a larger balance for a longer time to pay mortgage insurance for the “tax break”. It is also important to ask your Realtor or lender. Different programs and loan types have different mortgage insurance requirements and things frequently change. When I first bought my house, I had to mortgage insurance until 22% of the house was paid down and for a minimum of 5 years. Then it automatically dropped off. FHA loans now have mortgage insurance for the life of the loan. That is definitely an added cost to consider when choosing which financing option may be best for you.
Property Taxes
Here in Colorado we have seen huge increases in property values which in turn has resulted in larger property taxes. In 1982, Dennis Gallagher wrote the Gallagher amendment which capped/limited how much property taxes could go up year over year. However in 2020, that amendment got repealed. After significant public outcry from the homeowners across the state, Proposition HH was created. Proposition HH had ties with TABOR (Taxpayers Bill of Rights). In the 2023 election, was voted down by over 59% of voters. Coloradoans have still yet to see meaningful property tax relief.
Energy Efficiency Tax Benefits
Energy efficiency is another large one that we are seeing in Colorado. There are a number of things that you can do to improve the efficiency of your home which may be a good idea regardless of the tax breaks.
Water Heaters
Perhaps the most popular one that is being seen the most in new construction is the installation of tankless hot water heaters. I think these are a great improvement! Your company that comes in for the holidays will appreciate them too as the hot water never runs out.
Windows
Windows are another big improvement that can help retain heat/or air conditioning in the summer. If you haven’t priced windows lately, be prepared as they have went up in cost over the last couple of years.
Solar Panels
Another common improvement is the solar panels on the roofs. I’m a little more on the fence with this one from an economic standpoint. You often hear that they are able to reduce your energy bills to nearly nothing. That said, how many monthly energy bills does it take to break even with the cost of the panels. However, it is important for each homeowner to do a cost benefit analysis and see what makes the most sense for their situation.
While we are not tax professionals, we do know several people who are and we would love to get you in contact with them. One of our big goals here at the Weinland Team is making sure that you are well educated, not only about the buying process, but the benefits of homeownership. By making sound decisions and entrusting us as a real estate advisor, homeownership and property ownership can lead to a tremendous way of wealth building. As always, if you have any questions, give us a call, we are always here to help!
Written by Brandon Barnes with the Weinland Team at RE/MAX Alliance
Phone: (303) 552-6780
Email: Brandon@TheWeinlandTeam.com
Written by fortcollinsexperience
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