Tax Deductions for the Westfield Area Homeowner

The deadline for filing your 2023 income taxes is Monday, April 15th. That gives you just over 10 weeks to complete your return. Right now, that sounds like a long time. But it sneaks up on you faster than you think. Homeowners enjoy a few breaks at tax time. Here are a few tax deductions you need to watch out for this year.

Tax Deductions for the Westfield Area Homeowner

Mortgage Interest

According to Freddie Mac, the interest rate at the time of the writing of this post sits at 6.69% for a 30-year fixed-rate mortgage. If you bought your home back in October 2023, you might be paying closer to 8% right now. Fortunately, the mortgage interest deduction allows you to write off the interest on up to $750,000 of your mortgage. If you took out your mortgage loan before December 16, 2017, you may deduct the interest on up to $1,000,000 of your mortgage.

Property Taxes

Another deduction to watch for? Property taxes. We all pay property taxes. Fortunately, married couples may qualify for as much as $10,000 in property tax deduction. For single filers or married couples filing separately, that limit runs at $5,000.

PMI

Did you put less than 20% down when you purchased your Westfield area home? Then you may be paying PMI (private mortgage insurance) each month. Thankfully, that PMI may be deductible when you itemize your return.

Interest on Home Equity Loan

Did you decide to take advantage of your home’s equity to make much-needed improvements or updates? Well, the interest on that home equity loan may be deductible. However, if you decide to pay off bills, book a dream vacation, or use that money for your child’s college education, the interest on your home equity loan is not deductible.

Home Office Expenses

Since 2020, home office use has skyrocketed. Even though many companies expected employees to return to the office recently, some companies decided to allow their employees to continue working from home. If you fall in the latter category, your home office expenses may be deductible. Of course, there are restrictions. For example, your office space must be dedicated solely to office work. It cannot be a corner of the living room, a desk in the kitchen, or a guest room/office space. However, if you spent money turning that extra bedroom into a dedicated office, those expenses may also be a tax deduction.

Discount Points

When you bought your Westfield area home last year, you decided to bring your interest rate down by paying points. These “discount points” may also be tax deductible.

Capital Gains Exemption

While not a “tax deduction” per se, if you sold a home in 2023, up to $500,000 (for married couples) or $250,000 (for single filers or married couples filing separately) of the capital gains you received from the sale are tax-exempt. For example, you paid $200,000 for your home but sold it for $500,000. That means you received $300,000 in capital gains. If you are married, that $300,000 is tax-exempt. If you are single or married filing separately, you only owe income tax on $50,000 of those capital gains.

I am not a tax professional, nor do I claim to be. Always, always consult your tax professional about any tax deductions before filing. Ultimately, you are responsible for the returns you file every year.

Scott Gleason, CRS at Coldwell Banker Westfield, NJ Luxury Homes