2025 Home Owner Tax Season Tips
(Published on - 1/27/2025 3:36:00 PM)
2025 Tax Season
Tips for Home Owners
Does anyone dread Tax Season as much as I do?
Seems I am always searching for new laws, credits or ways to save money, while inadvertantly delaying the filing, in hopes of a new and improved program or relief plan, reviewing all the things, in an effort to not miss anything, rarely finding anything more than last year's filing....sound familiar?
While I am certainly not a financial advisor or personal accountant,
I can provide you with a few tips (that I follow myself) to help ease the burden of Tax Season!
Important to Note: All of your itemized deductions must exceed the IRS standard deduction, or you simply cannot use them! The standard deduction is a specific dollar figure you can subtract from your adjusted gross income on your federal taxes. The deduction, set each year by the IRS, varies based on tax-filing status. I recommend referencing the amounts below, then estimate if you would fall into this range. If you do, then you better get busy digging out that documentation!
The standard deduction for the 2024 tax year (for taxes due in April 2025) is:
- $29,200 for married couples filing jointly
- $14,600 for single filers and married individuals filing separately, and
- $21,900 for heads of households.
Do you fall into one of these categories? If you have paid out more than the standard deduction listed above, then itemize to reduce your tax bill, but remember- if you itemize, you’ll need to keep careful records in case of an IRS audit.
Here are some of the tax deductions homeowners can include in the calculation:
- Mortgage Interest- this is usually the biggest tax deduction for homeowners who itemize. You can deduct the interest you paid up to a limit, which depends on when you took out the mortgage. If your Mortgage was acquired Dec. 16, 2017, and later: You can deduct the interest on up to $750,000 of mortgage debt (or up to $375,000 if you're married and filing separately). For a Mortgage acquired from Oct. 14, 1987, through Dec. 15, 2017: You can deduct the interest on up to $1 million of mortgage debt ($500,000 if married and filing separately). If your mortgage was acquired before 1987- congratulations, you are most likely paid off and living the good life! You can also deduct interest you’ve paid on home equity loans and home equity lines of credit but only if you spent the borrowed money on home improvements. If you acquired a mortgage this year, and purchased Discount Points (the fees you pay while obtaining your mortgage, to lower your interest rate) count as mortgage interest and are deductible, but in most situations, you can't deduct the full amount in the year they were paid. Instead, you deduct a portion of them each year over the life of the loan.
- Property Taxes- as you might have guessed, there is also a limit on property taxes. You may deduct up to $10,000 ($5,000 if married and filing separately) of property taxes in combination with state and local income taxes or sales taxes.
- Home Office- if you are self employed and use part of your home regularly for your business, you may deduct home office expenses. A simple calculation multiplying the amount of space used by $5 a square foot = your deduction (with this method, 300 square feet is the max amount allowed). OR, you can take the square footage you use as office space, divided by the total square footage of your home. Determine the % of your home used as an office, and you may claim that % of all utilities. Ex. your home office is 10% of the total square footage of your home, you can claim 10% of all your home expenses.
- Medically necessary Home Improvements- many improvements to make a home more accessible, such as constructing entrance ramps, widening doorways or installing railings and support bars, usually don't increase the value of a home BUT they can be fully deducted.
- Energy Saving Home Improvements- eligible purchases include solar panels, energy-efficient windows, doors, insulation, central air conditioners and home energy audits. KEEP THOSE RECEIPTS! Starting in 2025, you can only claim these credits for equipment made by an IRS-deemed "qualified manufacturer." (These manufacturers have an agreement with the IRS to put product identification numbers on their equipment and report the PINs to the IRS. You have to include each item's PIN on your tax return in order to get the tax credits). 30% tax credit for some energy-efficient updates, capped at $1,200 per year. $2,000 credit for heat pumps, water heaters, and you can claim both (up to $3,200) if you qualify.
If I didn't mention exactly what you were looking for, visit the IRS site, as these are only a few that I (like I said earlier) like to take advantage of.
Good luck to you this tax season, I am off to gather receipts!
-LP
