Tax benefits for homeowners
Knowing which tax breaks are available to you may help you reduce your tax bill or increase your refund. Here are a few of the most common.
1. Mortgage interest
If your mortgage is $1 million or less,1 generally the interest you pay is tax-deductible. If you haven’t been in your home long, interest is likely a big portion of your monthly payment, so this can be a large deduction.
In addition to mortgage interest on your original mortgage, generally speaking, you also can deduct interest payments if you refinance. In many instances, the mortgage interest deduction also applies to a second home.
2. Property taxes
Generally, you’re allowed to deduct the amount you pay in property taxes.
U.S. average property tax bill
Source: U.S. Census Bureau, 2016
3. Interest on home equity debt
If you took out a home loan or line of credit, to renovate or for some other purpose, it may qualify as home equity debt. The interest is usually deductible on loan amounts up to $100,000 ($50,000 if your status is married filing separately).
4. Energy-efficient home improvements
If you installed energy-efficient windows and doors, or added insulation, you may qualify for a state tax credit. To see if your state offers deductions or credits for energy-efficiency improvements, check the Database of State Incentives for Renewables & Efficiency.
5. Renewable energy
If you installed solar panels, wind or fuel cells, or certain other equipment that uses renewable energy to help power your home, you may qualify for the Residential Energy Efficient Property Credit. To qualify, equipment must have been in service by the end of December 2016, with exceptions for qualified solar electric and solar water heating property. That credit has been extended to include property placed into service through the end of 2021.
Tip: Keep your receipts to make claiming credits easier.
Up to 30%
Credit of the cost of equipment and installation
Source: IRS, 2016
- If your filing status is married filing separately, this level is $500,000.
Neither Bank of America nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.