Jeni VanOrnum | Real Estate Insights & Education

Congratulations on your first year of homeownership! As 2022 comes to a close, let’s discuss tax benefits and planning for first-time homeowners.

Major Tax Deductions for Homeowners

Mortgage Interest Deduction: You can deduct interest paid on mortgages up to $750,000 (or $1 million if you bought before December 16, 2017). This is often the largest tax benefit.

Property Tax Deduction: Deduct up to $10,000 in state and local taxes (SALT), including property taxes.

Mortgage Points: If you paid points to lower your interest rate, you may deduct them in the year paid or amortize over the loan life.

Home Office Deduction: If you’re self-employed and use part of your home exclusively for business, you might qualify for this deduction.

Important Documents to Gather

Collect for your tax preparer:

• Form 1098 (Mortgage Interest Statement) from your lender
• Property tax statements
• Closing disclosure from your home purchase
• Records of any home improvements
• Home office expense documentation

First-Year Homebuyer Considerations

Closing Costs: Some closing costs are deductible in the year of purchase:

• Mortgage points
• Prepaid property taxes
• Prepaid mortgage interest

Not Deductible:

• Homeowners insurance
• Title insurance
• Appraisal fees
• Home inspection fees

Itemize vs. Standard Deduction

The 2022 standard deduction is:

• Single: $12,950
• Married filing jointly: $25,900

You should itemize only if your total deductions (mortgage interest, property taxes, charitable contributions, etc.) exceed the standard deduction.

Energy-Efficient Improvements

Certain energy-efficient upgrades may qualify for tax credits:

• Solar panels
• Energy-efficient windows
• High-efficiency HVAC systems
• Insulation improvements

Check IRS guidelines for current credit amounts and requirements.

Capital Improvements vs. Repairs

Capital Improvements (increase home value, tracked for future sale):

• Room additions
• New roof
• Kitchen remodel
• HVAC system replacement

Repairs (not currently deductible for personal residence):

• Fixing leaky faucet
• Painting
• Minor repairs

Keep records of all capital improvements—they increase your cost basis and reduce capital gains when you eventually sell.

Home Sale Exclusion (Future Planning)

When you eventually sell, you can exclude up to $250,000 ($500,000 married) of capital gains if:

• You owned the home for 2+ years
• You lived in it as primary residence for 2+ of the last 5 years

State and Local Considerations

Some states offer additional homeowner tax benefits:

• First-time buyer credits
• Property tax relief programs
• Homestead exemptions

Research your state’s specific programs.

Record Keeping Best Practices

Create a home finance folder containing:

• All loan documents
• Property tax statements
• Monthly mortgage statements
• Improvement receipts and contracts
• Insurance policies
• HOA documents

Tax Planning Moves Before Year-End

Pay January Mortgage Early: Making your January payment in December gives you extra deductible interest this year.

Prepay Property Taxes: If beneficial, pay upcoming property tax installments before December 31.

Complete Planned Improvements: Energy-efficient upgrades completed before year-end may qualify for 2022 credits.

Common Mistakes to Avoid

• Not keeping proper documentation
• Confusing repairs with improvements
• Forgetting to claim all eligible deductions
• Not consulting a tax professional

When to Hire a Tax Professional

Consider professional help if:

• This is your first year itemizing
• You have complex financial situations
• You made energy-efficient improvements
• You work from home
• You’re unsure about deduction eligibility

Looking Ahead to 2023

Plan now for:

• Setting up better record-keeping systems
• Scheduling energy-efficient improvements
• Understanding estimated tax payment needs
• Maximizing deductions

The Bottom Line

Homeownership provides significant tax advantages, but only if you claim them correctly. The mortgage interest and property tax deductions alone can save thousands annually.

I’m Here to Support You

While I’m not a tax professional, I can connect you with qualified CPAs who specialize in homeowner taxation. Your financial success matters to me.

Here’s to a prosperous 2023 in your new home!