When it is time to prepare and file your taxes, think of something that minimizes your total tax liability. As a new homeowner, you can be eligible for tax breaks. Even as an old homeowner, there are tax deductions that you might not be aware of which helps you save money when it is time to fulfill your tax obligations to the government. 

So, are you preparing your tax returns this tax season? Take note of this list of tax breaks that you can avail yourself as a real estate property owner. 

Property Taxes

You can write off local and state taxes you paid on your home. This tax deduction includes the taxes you may have paid at the purchase or sale of the property and the annual property taxes on your home’s assessed value. 

Requirements should be that the property serves as your primary residence or vacation home. Moreover, you should itemize your taxes to claim this particular tax deduction. If you opt for a standard deduction, you will not be eligible to claim the property taxes deduction. 

Mortgage Interest

Homeowners can also get a tax break on mortgage interest. This itemized tax deduction enables you to subtract mortgage interest from your taxable income. You can also deduct loan interest for a second home if it meets the qualifications of the Internal Revenue Service.

The types of mortgages that make you eligible for this tax deduction include loans to purchase, build, or improve a real estate property. Homeowners that are single taxpayers, married couples, and heads of households could subtract the interest on home loans up to $750,000. If a married couple files separately, they could deduct up to $375,000 each. 

Inheriting a Real Estate Property

You can avoid capital gains taxes when you inherit a real estate property. For example, if your father who just died left you a house with a value of $550,000 at the time of his death, but the property was purchased at $200,000 15 years ago, the cost basis of the property is the original price. It means there is no need for you to pay taxes on the $350,000 capital gains. 

Nevertheless, you may still have to pay inheritance or estate taxes as calculated using the size of the estate. There are three options for eliminating or minimizing capital gains tax on inherited property. One is to sell the house right after you inherit it, which leaves no room for the assets to increase in value any further. 

Another option is to make the property your primary residence instead of selling it right away. You can live for at least two years and then sell it to avail a capital gains exclusion of up to $250,000 from the property sale. 

The last option is to rent out the property instead of selling or living in it. However, you still have to follow tax rules in such a situation. If you treat an inherited home as an investment property, you might still have to pay capital gains tax if you choose to sell it later. 

Energy-Related Tax Credits

You can be eligible for an energy-related tax deduction if you are a homeowner. There are two circumstances where you can claim these tax credits. 

• There is a tax credit for energy-efficient property if you install wind and solar energy on your home. The 2022 Inflation Reduction Act extended and expanded this tax credit through 2034. 

• You can claim up to $12,000 back on taxes if you manage to spread out energy-efficient home improvements over the span of ten years. This tax credit is available under the Energy-Efficient Home Improvement Credit for qualified properties placed in service on or after January 1, 2023, and before January 1, 2033. 

Home Office Expenditures

You can deduct taxes on business expenses if you are using part of your house for business. This tax incentive is available for all types of properties used by homeowners or renters. Visit the IRS website or talk with its representative to know the particular requirements for this tax deduction. 

Moving Expenses

Relocating to another property due to employment or business reasons can make you eligible for a tax deduction on your moving expenses. The Internal  Revenue Service suggests that you must fulfill these qualifications. 

• Passing the time test

• Passing the distance test

• The start of your work closely relates to your relocation

Final Thoughts

While paying taxes is our obligation to make the government do its functions better, it can be burdensome to pay too much of it. Thankfully, the same government provides its citizens with tax breaks and incentives for the latter to save money on taxes. Thus, it is crucial to know the various tax deductions you may claim as a homeowner.