Homeowner Tax Deductions: What Qualifies in 2022

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• The Biggest Tax Breaks for San Diego Homeowners This Year •

Perhaps Benjamin Franklin said it best: “In this world, nothing is certain except death and taxes.” When tax time rolls around each year, many homeowners find themselves wondering which expenses they can claim for tax breaks.

Luckily, there are many tax deductions for homeowners that could amount to several thousand dollars.

Read on to learn more about homeowner tax deductions, how to use them, and whether they might be a way for you to lower your tax bill.

Homeowner Tax Deductions: What Qualifies in 2022

Standard vs. Itemized Deductions

Before exploring which expenses are deductible, it only makes sense to talk about standard versus itemized deductions. Both types of deductions can lower the amount you owe in taxes, but they work in different ways.

The Internal Revenue Service sets a standard deduction available to everyone who files taxes each year. The standard deduction breakdown for 2022 is as follows:

  • Single and married filing separately: $12,950 (up from $12,550 in 2021)
  • Married filing jointly and surviving spouses: $25,900 (up from $25,100 in 2021)
  • Heads of household: $19,400 (up from $18,800 in 2021)

The standard deduction is the simplest way to reduce your taxable income on your tax return each year. Rather than tracking expenses, saving receipts, and completing additional tax forms, you can claim a flat dollar amount on your return, as defined by your taxpayer status.

Of course, you can also track and itemize your qualifying deductions and claim this amount. If you are considering taking advantage of any homeowner tax deductions, make sure the total amount of your itemized deductions is larger than the current year’s standard deduction. Otherwise, it makes more sense financially to take advantage of the standard tax deduction.

8 Tax Benefits for Homeowners

The IRS has specific rules about the tax breaks available to homeowners. Let’s take a closer look at eight tax breaks you should know about if you own a home:

  • Mortgage interest. If you pay a mortgage on your home, you can take advantage of the mortgage interest tax deduction. Previously, homeowners were allowed to deduct the interest paid during the tax year on the first $1 million of their mortgage debt for a primary residence. However, the 2017 Tax Cuts and Jobs Act limited this deduction to $750,000 for single filers or married couples filing jointly. If you are married but filing separately, the deduction limit is now $375,000 for each party. Read IRS Publication 936, Home Mortgage Interest Deduction to learn more.
  • Home equity loan interest. A home equity loan is a lump sum that you borrow against the equity you’ve built in your home. If you used these funds to pay for a home renovation, you may be able to deduct the interest paid during the tax year.
  • Discount points. If you purchased discount points to lower the interest rate on your mortgage, you could deduct the cost of discount points. However, keep in mind that loan origination points are not tax-deductible, as these fees don’t affect the interest rate of your mortgage loan.
  • Property taxes. As a homeowner, you pay property taxes at both a state and local level. As a married couple filing jointly, you can deduct up to $10,000 of your property taxes. If you are single or filing separately, you can deduct up to $5,000 in property taxes.
  • Necessary home improvements. The trick here is what qualifies as “necessary.” If you choose to upgrade a fully functional kitchen or bathroom, that may not be eligible. However, if you made permanent changes to your home to make it more accessible or for medical reasons, such as installing a ramp or widening doorways or hallways, these home improvements could qualify.
  • Home office expenses. If you work from home, you may deduct your home office expenses of maintaining an office space. The size of the deduction is based on the percentage of your home that is dedicated to your office space. The IRS requires that you use your home office regularly and exclusively for business purposes to qualify for the deduction.
  • Mortgage insurance. Private Mortgage Insurance, or PMI, is an expense paid to the lender by many homeowners to help offset the risk of possible mortgage default. Your PMI payments can be deducted on a tax return each year.
  • Capital gains. Capital gain tax comes into play anytime you sell a home for a profit. It is determined by calculating the difference between the original purchase price and the amount you sold the home for. If you used the home as your primary residence for at least 2 of the last 5 years, you may be allowed to keep some of the profits without any tax obligations. As a married couple filing jointly, you can keep up to $500,000 in capital gains without a tax obligation. If you are a single filer or filing separately, each party can keep up to $250,000 tax-free capital gains.

Are There Any Homeowner Expenses That Are Not Deductible?

Some expenses do not qualify as tax deductions. These types of costs include:

  • Fire insurance
  • Homeowners insurance premiums
  • Depreciation
  • Your mortgage principal
  • The cost of utilities, such as electricity, gas, or water
  • Homeowner association fees
  • Transfer taxes or stamp taxes
  • Forfeited deposits, down payments, or earnest money

As a homeowner, you can’t deduct all of the expenses related to your home. If you have any questions about what is deductible and what is not, it is always best to consult with your tax professional.

Start Organizing Your Homeownership Tax Paperwork

Don’t wait until you file taxes to start benefiting from homeownership. You may be able to reduce your federal income tax withholding, increasing your take-home pay. If you’re ready to take the leap into homeownership, be sure to get in touch with one of our local real estate agents. Have mortgage questions or are curious about refinancing? Talk to one of our online home loan experts today!

Please note that Reali, Inc. does not provide legal, investment, accounting or tax advice, please consult a licensed attorney, financial planner, CPA or tax professional on these ‘tips’ and any information or opinions contained herein.

The Bottom Line

Call us at (858) 880-0195 or email portia.green@reali.com to get started with Reali today.

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About The Author
Portia Green, REALTOR®

Portia Green is a highly experienced full-time REALTOR® specializing in the representation of Sellers, heralded by her clients as data-driven and an effective negotiator. Producing $25M total in residential sales volume, Portia's goal is to help her clients achieve the best results when selling their homes and to make their experience an enjoyable one. She has successfully sold real estate since 2008 and has gained an in-depth knowledge of local real estate markets & seasonal trends. Portia has achieved a 100% customer satisfaction rating and wants to share her expertise & personal service with you in the sale of your home. When listing your home with Portia Green and Compass, you'll receive the hands-on service you need and desire. Portia will help you manage the entire process of selling your home from pricing, preparing and staging the house, to marketing, negotiating offers, inspections, all the way to closing. She will recommend skilled vendors for any job needed, personally host Open Houses, and ensure that all showings are accompanied. At Compass, Portia offers a wise no-nonsense way to sell your home for the best price and the least hassle. With a keen eye for staging & preparing listings to maximize Buyer appeal, all of Portia Green's listings are professionally photographed using HDR (High Dynamic Range) photography to provide the highest quality photos in the industry. Professionally printed marketing materials are prepared for all Open Houses. We also capture a 3D scan of your home that creates an interactive walkthrough online along with a custom-designed floor plan and targeted digital marketing campaigns on Google & the most popular social media channels. Compass participates in the Multiple Listing Service, which is the local real estate database of homes listed for sale that all REALTORS® use in helping their Buyers find houses. Your home will appear on every real estate website, in its best light, making a stunning camera-ready debut. Portia Green's home valuation expertise and extensive experience in comparative market analysis will help price your home accurately. She has refined her skills to help you pinpoint which features of your home will result in more showings and better results. Her mantra is for you to be ready to sell your home and feel good about that first. Portia knows that home inspectors always find a problem; that drones take some of the best photos in town; and that her eyebrows will grow to the floor in the time it takes her to read everything that's happening with your HOA, but that doesn't mean she won't do it anyway. Eyebrows be damned. You'll always need a place to unplug, connect, dream, grow, or just be yourself. That makes what Portia does even more meaningful. She’s ready to go the extra mile to help you find just the place. Whether you're selling your very first home, offloading an investment property, or want a vacation getaway with passive income, she is attentive to the details of every home sale. Portia helps busy people navigate this crazy real estate market like a pro, so don't be shy. Every great relationship starts with free advice and a friendly chat. Ask as many questions as you need to. Selling houses is her jam! www.portia.realtor