Happy couple buying new home and receiving house keys form real estate agent.

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You can take advantage of significant tax credits and deductions when you own a home. The Internal Revenue Service (IRS) offers numerous tax breaks to incentivize homeownership. When you own a home, you’re able to write off a huge chunk of your tax liability and get thousands of dollars in tax deductions when it’s tax season.

However, there is a catch. If you’re not aware of the tax credits and deductions offered by the IRS when preparing to file your taxes, you’ll not be able to minimize your taxable income and maximize your tax benefits. That’s why it’s essential for you as a homeowner to familiarize yourself with the various tax credits and deductions you qualify for.

How Home Tax Deductions Work

A tax deduction is a benefit that helps a taxpayer to reduce the amount of tax they owe. Once you own your home, you can take advantage of tax credits and deductions to lower your tax bill. How much money you’ll be able to save on your tax bill this season will be determined by whether you choose to go with a standardized tax deduction or itemize the various tax deductions you qualify for.

When applied, both tax deductions will save money on your taxes. The difference is that, with a standardized deduction, the amount taken from your total taxes is fixed. In contrast, an itemized tax deduction allows you to itemize all the tax deductions you qualify for. It makes financial sense only to itemize your deductions when their sum is higher than the standard deduction.

There are a lot of advantages to owning a home, especially when it comes to your taxes. Keep reading to learn how owning a home might give you the break you need every April 15th.

Some Of the Tax Deductions A Homeowner Can Capitalize on

1. Mortgage Interest Deduction

If you are an individual taxpayer or a married couple, you can claim the interest paid on the first $750,000 of your mortgage debt. Once you receive a Form 1098 detailing the interest you paid in the previous year from your lender, you’ll deduct the amount on line 8a of the 2022  Schedule A Form 1040.

2. Capital Gains from Your Home Sale

You won’t have to pay taxes on all or part of the capital gain you make when selling your house. If you sell your home, the capital gains up to $500,000 if you’re married filing jointly and $250,000, if you’re single, are tax-free. The house must have been your primary residence for two of the five years running up to your sale date for you to qualify for this perk.

3. Home Office Expense Deduction

If you’re self-employed or work at home, you may qualify for the home office expense deduction. You can claim this deduction if you use part of your home regularly and exclusively as your primary place of business. Passing the test for this deduction saves you money on your tax bill since part of your insurance costs, utility bills, and other home expenses are deducted against your business income.

4. Mortgage Insurance Premium Deduction

If you’re still paying mortgage insurance as part of your monthly mortgage payment, you may be able to deduct your mortgage insurance payments from your taxable income. If your gross income is less than $100,000 a year, you will be able to deduct the cost of mortgage insurance off of your tax bill. If you’re married and file separately, your limit is $50,000.

5. Deductions For Energy Efficient Upgrades

Making energy-efficient home improvements could reduce your tax bill. This incentive applies to alternative energy improvements made to your homes, such as installing solar panels, solar water heaters and geothermal heat pumps. The tax credit amount received is based on when you installed the items.

6. SALT Deductions

The deduction for state and local taxes (SALT) allows homeowners to deduct certain taxes paid to state and local governments, including property taxes. If you itemize SALT deductions on your federal return, you’ll pay less in federal taxes by deducting the amount you spent on qualifying state and local taxes. The deductible amount is capped at $10,000 for single taxpayers and $5,000 for married couples filing separately.

7. Mortgage Points Deduction

Another tax benefit of owning a home is the ability to deduct mortgage points you paid upfront when closing on your home purchase. The mortgage points you paid to your lender in a bid to lower the interest rate on your loan are fully deductible in the year you pay them. Capitalize on these tax deductions.

8. Standard Deduction

Look closely at the standard deduction allowed by the IRS when considering the tax deductions available to you as a homeowner. If you opt for the standard deduction, you’ll agree to have a set amount of money deducted from your taxable income. With the standard deduction, you won’t itemize your deductions. This year, $12,950 is the standard deduction for singles and married taxpayers filing separately. For heads of household, the amount is $19,400, while $25,900 is the standard deduction for married couples filing jointly.

Final Word

Owning a home is a sure way of reducing the amount you pay in income taxes each year. Consider itemizing your deductions if you qualify for deductions higher than the standard deduction amount for your tax filing status. If the standard deduction is higher than your itemized deductions, the standard deduction makes more sense.

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Young couple buying a new house

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As real estate prices rise, many renters are asking the question, “Is this the right time to buy a home, or should I keep renting?” Buying property may seem daunting, both from a cost and commitment perspective, but there are many reasons to do so, even in a competitive marketplace. While it may not be appropriate for everyone, homeownership is a great opportunity that should be strongly considered by anyone stuck in the renting cycle.  Here are some of the reasons why buying a home and escaping rental living could be in your best interest.

 1. Buying a home is an investment

Many people look at mortgage payment calculators and see thousands of dollars pouring out of their pockets in order to secure a place to live. But each month you own your home and pay your mortgage, you are creating equity which can be used in several different ways. Aside from huge lending and credit benefits, money paid into a mortgage will come back to the owner the day they decide to sell, along with any profit from increased valuation on the property. Granted, there are significant interest payments required on a mortgage, but no matter the rate, it’s still exponentially better than 100% of your monthly payment going directly to a landlord.

2. Ownership creates stability

Anyone who has ever rented understands the stress involved with living in uncertain conditions. Renters perpetually face a situation where lease terms and conditions hang over their heads, and they need to plan ahead for the worst-case scenario of the landlord selling the property. With home ownership, there is never a concern about how long the property can be occupied, or who is allowed to live there. Another benefit of this stability is the freedom to alter the property as desired. Want to buy a dog? Expand a bathroom? Move a shed? When you own your home, these are all things that can happen without consultation with a landlord.

3. Mortgage rates are historically low, but may start rising again soon.

Mortgage interest rates are a very important part of homeownership. Over the term of a mortgage, a fraction of a percent can equal thousands of dollars in interest paid to the lender. Even with a recent surge in rates, the average 30-year fixed rate is still hovering near all-time lows. Due to this historical dip, it can be expected that rates will rise in the short to medium-term future, which will cost owners significantly more in interest payments.

Taking advantage of low-interest rates is a great way to maximize value in a purchase, and it is highly recommended that potential owners seize this opportunity while they can. 

4. Tax breaks

There are a number of ways homeowners can use the purchase of a home to their advantage when it comes to taxes. From borrowing from retirement funds to make a down payment, to deductions and credits on mortgage and interest payments, to home improvement credits, the tax system creates several ways for homeowners to benefit from their homes.

As an example, a couple buying a $500,000 home could withdraw $20,000 from their IRA’s without penalty to put towards a down payment. Once the house is purchased, any interest paid on the mortgage can be deducted, and depending on the couples’ incomes, a credit would also be applied.

5. Generate revenue by renting

After a lifetime of renting, wouldn’t it be nice to flip the script and be the one getting paid every month? Whether it be a basement suite, Airbnb, or long-term rental, there are numerous ways to profit from a property. An owner can use their home to create a reliable and lucrative revenue stream from short, partial, or long-term renting, all while creating equity for themselves.

 6. It begins a legacy

Financial reasons aside, purchasing a home can be the beginning of a family’s life story. Homes are a part of people’s history, and can stay within a family for generations to come. We’ve discussed all the monetary reasons why owning a home is a benefit, but no one can put a price on building a life in a place that you love.

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Real estate market trends concept; Miniature wooden houses and red arrow up.

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Over the last two years, the real estate market has seen several major fluctuations. The market nearly stood still during pandemic lockdowns followed by an explosion of overwhelming home buyer demand in 2021. Can the momentum and pressure continue in the face of the housing shortage? What solutions and developments does 2022 have in store for the real estate market?

We’re diving into the essentials of the upcoming housing market trends.

1. Mortgage Rates and Home Prices Are Going Up 

Mortgage rates are currently on the rise from their historic low in the 3% range. We expect to see them remain low but approach 4% in the next year of financial and market recovery. However, this is slightly discouraging for homebuyers looking to get a good price with low interest on a new purchase, as increased interest rates mean increased costs across the board. As mortgages become more expensive, home values continue to shoot upward in response to high demand and short supply.

2. Pricing Challenges for First-Time Buyers

The rising home prices and mortgage rates are creating a uniquely problematic challenge for first-time homebuyers who might have limited capital and big dreams. Right now, it’s fewer houses for more across the board as young families are struggling to find large houses in an affordable starter-home price range. 

Right now, competition and inventory are settling into a new normal. Bidding wars have become common and even buyers with capital to invest are finding it hard to close on an offer with so many other buyers on the market.

3. Pandemic Home Buying Trends

As a result of quarantines and the remote work movement, many people are looking for homes with an extra bedroom for a work-from-home space, or more open-plan living space, as opposed to smaller, cramped apartments. The remote work trend is not expected to disappear anytime soon, if ever. Because of this, large amounts of people are no longer tied to the big city centers and business hubs. Their freedom to move away from city life will continue to play a key role in the high-competition housing market, continually shaping current and post-pandemic home buying.

Larger Homes in Demand, Smaller Homes Gaining Popularity

2022 is looking like a great year for tiny home sales, as miniature cottages become more appealing to those looking to stake their housing claim. Tiny homes and modular homes are both becoming more appealing options to sidestep the slowdowns of a cramped market and stick-built construction delays. These homes especially appeal to those who may be looking to downsize and simplify their lifestyle. These homes are also simpler to build at a far lower price point, are a quick and viable option for those who have a plot of land they would like to utilize, and as an added bonus have a more overall sustainable impact on the environment. As the market moves into 2022, the momentum tiny homes and cottages built up in 2021 can be expected to continue. 

Remote Work Pushes Buyers Away from Centers of Employment

One of the unique side-effects of the pandemic is the remote and hybrid work movement. Professionals who no longer have to return to the office (or very rarely) are choosing homes further from employers and city centers. Suburban and even rural homes are more desirable as the commute becomes less of a consideration. Many people are now comfortable with a 2+ hour drive to work, especially if they only come in once or twice a month.

4. Sellers are Returning to the Market with Greater Strength

A great relief to the 2022 real estate market, however, is the return of sellers. During this current housing shortage, there has been a reduced percentage of sellers on the market, most citing that they couldn’t find a home to buy so were not comfortable selling. As the market settles down from the 2021 frenzy, cautious sellers are joining the market, increasing the available inventory, and effectively making room for more sellers. This trend will help lighten pressure in the near future as sellers self-perpetuate a market increase.

5. Supply Chain Delays on Constructing New Homes

Unfortunately, we’re seeing no near end to the supply chain delays interrupting our progress in building new homes to alleviate the housing crisis. Contractors across the nation are facing construction delays for apartments, condos, and single-family neighborhood developments. This is one of the reasons that interesting alternatives like pre-constructed tiny and modular homes are rising in popularity.

We will see the supply chain transform in 2022, as locals look inward for sources and solutions when international shipping falls through.

6. Virtual Selling/Buying Stays the New Thing

Lastly, you can expect video tours to stay at the top of the charts. With COVID and travel restrictions continuing to be an issue, socially distanced house-hunting is here to stay. Fortunately, we have some great technology to make it work. In addition to top-notch photography, 360 cameras can provide immersive home tours that give potential buyers a feel for the space and floorplan.

Buyers love virtual tours, and sellers can minimize their exposure to curious strangers in their homes, making it a safe process for all involved!

2022 is looking to be one hot year for real estate. With prices going up and the market just now starting to innovate for current challenges, we’re looking toward a technology-driven, high-pressure new real estate year.

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