Friday, 17 May 2024

Homeowners tax optimization guide: itemizing deductions to save tax

If you own a home in Pompano Beach, Florida, you can save thousands of dollars annually by simply itemizing your deductions. Not just that, married couples who file jointly can enjoy the enhanced annual deduction limits. 

However, knowing all the ins and outs of itemizing deductions is not everyone’s cup of tea. Therefore, the best way to ensure that you are itemizing all the tax-deductible expenses is by hiring a Pompano Beach tax accountant. You can deduct property taxes, mortgage interest, and much more to save taxes.

Understanding itemized deduction limits

Homeowners can save several thousand dollars annually by itemizing deductions exceeding the IRS standard deduction limit. You can subtract the standard deduction figure from your adjusted gross income (AGR) on the federal taxes payable. 

The IRS standard deduction figures are as follows:

  • $13,850 for married individuals who file separately and single filers.
  • $20,800 for the head of household.
  • $27,700 for married couples who file jointly.

If you itemize an expense, you will have to maintain the record of the same as the same might be needed in case of an IRS audit.

Homeowner expenses that can be itemized to reduce taxes

Following are the tax deductions that a homeowner can include in the calculation:

  • You can deduct the interest paid on a mortgage. A married couple can deduct the interest on a mortgage debt of up to $750,000 or $375,000 if you file individually. 
  • You can deduct the interest paid on a HELOC (home equity line of credit) or a home equity loan, provided that you spend the borrowed money on home improvement only.
  • A married couple filing jointly can deduct up to $10,000 paid towards property tax. For an individual, this limit is $5,000.
  • If you are self-employed and use your home partly for your business, you may itemize your home office expenses for deductions. However, this does not apply to employees working from home.
  • The expenses incurred towards medically necessary home improvement or installation of health care equipment can also be itemized for tax deductions. 

Homeowner expenses that are not tax-deductible

A homeowner, however, cannot itemize all the expenses as tax-deductible. Some examples are: 

  • The cost of refinancing a mortgage, like credit report, loan assumption, appraisal fees, etc.
  • Forfeited earnest money, deposits, or down payments.
  • A home insurance premium.
  • A homeowner association fee.
  • Rent paid for residing in the home before the closing date.
  • Stamp taxes or transfer taxes
  • Depreciation, utilities, wages for domestic help, etc.