In 2016, homeownership rates in the United States hit their lowest level since 1965. With that information in mind, it seems that the American Dream is no longer as attainable as it once was. In an effort to help boost homeownership rates once more, the Federal government has changed a few things. Here are some of the most important 2017 tax breaks for luxury homeowners.
Right now, the mortgage interest deduction offered by the federal government is capped at $1 million for married couples filing jointly and $500,000 for single individuals or married couples filing separately. Most of the benefits from this deduction go toward individuals who make more than $100,000 per year. If your mortgage is $500,000 with a 4.5% interest rate, you’ll save $10,000 in the first year alone. If the value of your mortgage is less than $1 million, you may qualify for some substantial 2017 tax breaks.
Energy credits aren’t deductions – they’re tax credits, which could be even better than a deduction. For example, let’s say you update your luxury home with new doors, windows, and insulation, and the total deduction you would get is $2000. If this were applied as a deduction, and you’re in the 33% tax bracket, you’d only lower your tax obligation by $660. However, because it’s applied as a credit, you’ll lower your entire tax bill by $2000. There are limitations based on purchase, of course, but the savings from these 2017 tax breaks can truly add up.
You can get 2017 tax breaks on state taxes you paid on your primary residence from your federal tax obligations, as well. A nationwide study of property taxes conducted by SmartAsset shows that most Colorado homeowners pay an average of only 0.6% of their assessed property values in the form of taxes to the state, which compares to the national average of 1.19% of property value nationwide. This could mean a huge deduction for luxury homeowners. If your assessed property value is $750,000, this means you’ll pay $4500 in property taxes to the state of Colorado, but you can deduct that from your federal taxes.
While it’s rare that an insurance company won’t cover loss or damage to a luxury home, it can and sometimes does happen. Unfortunately, when your insurance company denies your claim, that’s money you must spend out of pocket to repair your home and your property. The federal government allows you to deduct any casualty losses, which can help ease that financial burden somewhat. However, in order for you to qualify for this deduction, the casualty must exceed 10% of your adjusted gross income. You won’t be able to write off a broken window, but you may be able to write off losses after a substantial flood or massive storm, depending on their severity.
There are plenty of 2017 tax breaks out there, no matter how much money you make or how much your home and property is worth. In fact, in some cases, luxury homeowners may benefit the most from some of these programs, including the mortgage interest deduction. Talk to your tax preparer to find out just how much you can save.