2019 Home Tax Deductions and What New Homeowners Need to Know

Model house with a bottle holding sand in it

If you’re one of the millions of Americans who dreads tax season, you may just be in luck — at least if you bought or sold a home this year.

Homeowners can usually qualify for a number of valuable write-offs and tax deductions that other citizens don’t have access to. They can lower your tax burden, offset the costs of homeownership and, yes, even increase your refund.

And if you’re new to homeownership? You’ll qualify for even more of those deductions.

Want to make sure you’re taking full advantage of the homeownership tax perks you’re eligible for? Here are the potential write-offs you’ll want to consider:

  • Mortgage interest deductions. In most cases, you can deduct any interest you pay on your mortgage loan — up to $750,000 in total debt. If your loan is older than Dec. 15, 2017, you can deduct interest on up to $1 million. (The numbers are a little different depending on if you file solo or jointly, so be sure to consult your tax advisor).
  • Property taxes. Most homeowners can deduct their entire property tax bill. The catch? It just has to be under $10K. As of December 2019, SALT deductions — combined state and local tax deductions — can’t exceed $10,000, but that limit is currently under fire in Congress. Be sure to check in with a tax pro, as you may be able to deduct even more.
  • Home office deductions. If you work from home or even just work remotely a portion of the time, you may be able to deduct a whole slew of work-related costs. You can, of course, write off basics like the equipment you use for work and a portion of your mortgage payment for the space you use, but you can also write off less obvious items, like your home insurance, lawn maintenance, repair costs, utility bills, and more, as well as overall depreciation of the home.
  • Home equity loan interest. Not all home equity or HELOC loan interest is deductible, but if you use your funds to actually improve the value of your property (make repairs, upgrade it, renovate it, etc.) then you’re free to deduct it from your annual tax liability. Just keep in mind: you can only deduct interest on up to $100,000 in loans.
  • Energy-efficient upgrades. Want to add some solar panels, a wind turbine, or a solar water heater? You can offset some of the cost with a key tax write-off — at least for the next year or two. For the 2019 tax year, you can deduct 30 percent of your eligible costs. For 2020 and 2021, it drops down to 26 and 22 percent, respectively.
  • Mortgage credit certificates. If you meet certain income requirements, you might also qualify for a mortgage credit certificate. These offer an outright, dollar-for-dollar credit toward your tax liability based on the mortgage interest you pay annually. So, for example, if you paid $2,000 in mortgage interest and qualify for an MCC, you’d be able to reduce your annual tax bill by $2,000.
  • Discount points – If you just bought a home and you paid discount points to lower the interest rate on your loan, then you’ve got another deductible in your pocket. Since points are basically pre-paid interest, they’re considered write-offs just like mortgage interest is. Simply deduct the full total you spent on points at closing, and reduce your tax liability accordingly. In the future, if you decide to refinance your mortgage loan, you can also deduct points for that year as well.
  • Capital gains. If you sold a home before buying your new one, you might be able to write off your profits, too. As long as you made $250,000 or less on your home sale, then all your capital gains are deductible ($500K if filing jointly with your spouse). The home must also have been your primary residence at least two out of the last five years.

Paying mortgage insurance? Unfortunately, you can’t write that off anymore. While there used to be a deduction on private mortgage insurance available, that was eliminated with the Tax Cuts and Jobs Act of 2017. There’s a chance the deduction may be revived, though, so keep it on your radar for future tax seasons.

A quick note: We’re not tax pros nor financial advisors. Always run your tax plan past a licensed tax professional before filing your returns (they might even have some more deductions up their sleeves!).

Want These Homeowner Tax Write-offs on Your Next Return?

If you want to leverage some of these valuable tax deductions next time around, consider buying a home in 2020. Want help doing so? Get in touch with an Embrace Home Loans advisor today to get pre-approved.

Share this:

Aly Yale

Aly J. Yale is a mortgage and real estate writer based in Houston. Connect with her at AlyJYale.com or on Twitter at @AlyJwriter.