TAX DEDUCTIONS FOR HOMEOWNERS
Unless you’re a tax expert, it can be tricky to determine exactly what deductions you should take as a homeowner. And recent changes to the tax laws can affect what deductions you may be eligible for. If you just purchased your first home in 2020, then it’s important to set aside time before you file to review your options. Here’s what you need to know about tax deductions for San Antonio homeowners in 2021.
Standard or itemized?
When you’re filing your taxes, you have the option of choosing standard or itemized deductions. But be aware that the Tax Cuts and Jobs Act of 2017 made changes to these deductions. The federal government increased the standard deduction available to taxpayers. In 2021, the standard deduction is $18,800 for a single person and $25,100 for married couples who are filing jointly. For most people, the standard deduction will be larger than what your itemized deduction would be. However, in some cases, you may want to take the itemized deductions, which are explained below.
Mortgage interest tax deductions
The mortgage interest tax deduction allows homeowners to deduct their mortgage interest from federal and state income taxes. This can be particularly valuable to those who just purchased or recently refinanced a home. The bulk of each early payment (more than 80 percent) goes toward mortgage interest. This is more than $15,000 a year for the average 30-year fixed-rate mortgage. You can also deduct interest from second homes, boats, land, and homes outside the United States. Be aware that that deduction is limited to $1 million for debt secured between 1987 and 2017 and $750,000 for debt secured after December 15, 2017 ($375,000 if you file as a single).
Mortgage insurance tax deductions
If you purchased a home in San Antonio with a low down payment, then you’re probably paying for private mortgage insurance (PMI). The fees you pay for PMI may be deductible from your taxes. However, be aware that there are income limitations for deducting mortgage insurance. They are $54,500 for those filing separately and $109,000 for those filing jointly. Since PMI can cost up to 1.15 percent of your purchase price, this can be a significant deduction if you qualify.
Property tax deductions
Finally, homeowners may also be able to deduct property taxes. If you just purchased your home in 2020, then you are allowed to deduct the property taxes that you paid when you closed on your home. Other fees may be deducted as well, including transfer and recordation fees or real estate taxes that your lender paid. You can also deduct loan origination fees, also known as points. The IRS considers loan origination fees to be prepaid interest on a mortgage.
For other real estate advice contact Melissa Muse Wiggans, Broker and Owner of Real Estate Muses. Her team of top San Antonio Realtors specialize in residential real estate for those buying and selling homes in San Antonio as well as military families moving or relocating to San Antonio, TX. Visit realestatemuses.com or call 210-485-9913 today.