While the due date for taxes has been pushed back to July 15th, due to the COVID-19 outbreak, many people are working on filing their taxes ahead of the stimulus checks that should be released during April. If you are a homeowner, there are a few deductions you can take advantage of to help you save! Consult a tax preparation professional for advice on these credits and deductions.
Federal Deductions
- Mortgage Deductions: You can deduct any interest you pay on a loan secured by your primary or secondary home. This excludes investment properties.
- If you took out a mortgage on or after Dec. 15th 2017, you may be able to take a mortgage interest deduction up to $750,000 on your primary residence.
- If you took out a mortgage before Dec. 15th 2017. you may be able to take a mortgage interest deduction up to $1,000,000 on your primary residence.
- Home Equity Loan Deductions: If you used a home equity loan or line of credit to buy, build, or make major improvements, you can deduct the interest paid on said loan or line of credit.
- Other Home Improvement Deductions: There are two specific types of of home improvements that qualify for a tax deduction.
- Medically-Necessary Improvements: If home improvements were made due to illness or a medical reason such as installing a wheelchair ramp or making adjustments to a bathroom shower, these improvements can be deducted as a medical expense.
- Home Energy Efficiency: If improvements were made in 2019 to increase your home’s energy efficiency, such as solar panels, you are eligible for a 30% tax credit. Keep in mind that this tax credit will change to 26% for 2020 and 22% for 2021.
Maine-Specific Deductions
- Maine Homestead Exemption: If you have owned your home in Maine for at least 12 months, you can qualify for this exemption. If reduces the home’s value by $20,000 in relation to its tax value. For example, a home with a $300,00 value would have a tax value of $280,000, therefore reducing the overall tax rate.
- Apply Here to Qualify: https://ptla.org/maine-homestead-exemption-tax-relief-maine-homeowners
- Maine Property Tax Fairness Credit: This credit works for both home owners and renters that helps people who have either high property tax payments or rent payments compared to their income. Your household income must be $53,333 or less, and as a home owner, your property tax for a home in Maine must be more than 6% of your adjusted gross income (AGI). For renters, if your rent is more than 40% of your AGI, you also qualify.
- To find out more or see if you qualify, you can reach out to Maine Revenue Services at 207-626-8475 or visit this website: https://www.maine.gov/revenue/taxrelief/ptfcsummary.htm
Situational Deductions
- Did you sell your home? You can deduct:
- Mortgage interest paid at a settlement or closing.
- Real estate property taxes paid at settlement or closing.
- Capital Gains Exclusion allows you to exclude up to $250,000 for single filer or up to $500,000 for joint/married filers if you sell your primary residence (and lived there for at least two of the past five years). This is calculated using the total financial investment of the property of the date of sale, including the price paid for the home and any improvements made over the years you owned your home.
- Did you buy a home? You can also deduct:
- Real estate property taxes paid at settlement or closing.
- Are you self-employed and work from home? You can deduct:
- Home Office Expenses if your space is used regularly and exclusively for self-employment work and is used to set aside product samples or inventory. The simplified deduction is typically calculated at $5 per square foot used as long as the space is less than 300 square feet. If your home office space is larger than 300 square feet, there are itemized deductions that you can make that include mortgage interest, home depreciation, property taxes, utilities, homeowner’s insurance, and home maintenance deductions that you pay during the year.
You can always each out to the experts at the Real Estate Store to find out more about real estate!
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