02/27/2025
As we are right in the midst of TAX SEASON - Take a look at a few important tips for tax deductions and credits when it comes to your mortgage and home improvements:
Mortgage interest deduction:
Taxpayers who itemize deductions, instead of taking the standard deduction, can deduct mortgage interest paid for loans on their main home AND a second home—up to a point. You generally can deduct home mortgage interest only to the extent the loan proceeds from your mortgage are used to buy, build or substantially improve the home securing the loan. The loan can be a first or second mortgage, a home-improvement loan, a home-equity loan or a refinanced mortgage.
*For mortgages originated on or before Dec. 15, 2017, interest on as much as $1 million of debt is deductible ($500,000 if married filing separately).
**For mortgages originated after Dec. 15, 2017, interest on up to $750,000 of debt is deductible ($375,000 if married filing separately).
Deduction for state and local property taxes:
Homeowners who itemize deductions can deduct state and local real-estate taxes, subject to an overall SALT cap. The deduction for state and local taxes, including income, sales or real-estate taxes, is limited to $10,000 per return ($5,000 if married filing separately).
CREDITS!!
Energy-efficient home improvement credit:
*Homeowners who make certain energy-efficient improvements to their homes can claim a tax credit of up to $3,200 a year.
This credit equals 30% of the cost of allowed improvements. Insulation, windows and doors can qualify. Heat pumps, water heaters and biomass stoves can count, too.
**There are sublimits for different types of improvements: $600 for windows, $2,000 for a heat pump, for example. Unlike tax deductions that lower income, a tax credit is typically a dollar-for-dollar reduction of tax. Certain efficiency standards must
be met to qualify.
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ELIZABETH COETZEE/WSJ