Between mortgage payments and insurance premiums, being a homeowner is a major financial commitment. Owning a house may come with lots of costs, but these expenses can offer a wide range of tax planning benefits. Here are a few tips to help you save a little money if you’re a new homeowner looking to lower your tax burden. 

Tax Prep Strategies to Consider If You Have a Mortgage

1. Deduct Mortgage Interest

Federal tax law allows you to deduct the interest you paid on your mortgage within the applicable year. If your home was purchased after December 16, 2017, you can claim interest for the first $750,000 of your loan. If you’re married but are filing separately, you can deduct up to $375,000 of your mortgage debt. 

If you bought your home before this date, these limits would increase to the first million or first $500,000 of your loan, depending on how you file.

2. Claim Property Tax Deduction

While paying state or local property taxes can take a big chunk out of your bank account, you’ll be able to deduct the amount when it comes time to file federal taxes. Currently, homeowners are allowed to deduct up to $10,000 in state and local property taxes or $5,000 if married and filing separately.

3. Invest In Energy-Efficient Upgrades

Equipping your home with sustainable solutions—such as solar panels, energy-efficient kitchen appliances, and foam insulation—can entitle you to several tax credits, while also lowering your long-term utility costs.

These credits can lower the amount you’ll be expected to pay on your tax bill, but many of them are only likely to qualify through 2021. It’s important to take advantage of them while they’re still available.

4. Apply Related Expenses to Your Adjusted Basis

Keep detailed records of your home improvement expenses throughout the entire span of owning the property. When you sell your home, you can add these expenses to your “adjusted basis” or investments you’ve put into the property as the owner. If you make capital gains on the sale, you can apply the adjusted basis amount to lower your total tax burden.

5. Calculate Home Office Use

When you work from home or are self-employed, you can deduct expenses that apply to your office. In addition to office equipment and other supplies, you can deduct a portion of your mortgage costs. This portion is based on the actual size of the rooms you use for work purposes.

Tax planning as a homeowner shouldn’t be a hassle. Engelson & Associates in La Crosse, WI, is committed to providing seamless tax preparation services to clients throughout the tri-state. This CPA firm will thoroughly review your finances to identify all homeowner deductions to reduce your total tax burden. To learn more about their services, visit the firm online. If you’d like to schedule a consultation with an experienced CPA, call (608) 526-3437.