20 Property Tax Deductions You Shouldn’t Overlook
Maximize your savings by claiming these often-overlooked property tax deductions.
- Daisy Montero
- 5 min read
Many homeowners miss out on valuable tax deductions simply because they do not know they exist. Understanding what qualifies can put money back in your pocket instead of leaving it on the table. Make sure you are taking full advantage of every opportunity to save on your property taxes.
1. Mortgage Interest Deduction
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Homeowners can deduct mortgage interest on loans up to a certain limit, making it one of the most significant tax breaks. This applies to primary and secondary homes, reducing taxable income substantially. Keeping track of interest payments can lead to significant savings during tax season.
2. Property Tax Deduction
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State and local property taxes are deductible, but there is a cap on how much you can claim. This deduction helps reduce your taxable income, easing the financial burden of homeownership. Keep track of all your property tax payments for accurate deductions.
3. Home Office Deduction
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If part of your home is used exclusively for business, you may qualify for a home office deduction. This can cover a percentage of your rent, utilities, and even home repairs. It is an excellent way for remote workers and small business owners to reduce their tax burden.
4. Energy-Efficient Home Improvements
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Installing energy-efficient upgrades like solar panels or energy-efficient windows may qualify for tax credits. These deductions can offset installation costs and promote long-term energy savings. Check if your home improvements meet the eligibility requirements before filing your taxes.
5. Medical Home Improvements
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Home modifications for medical reasons, like wheelchair ramps or stairlifts, may be tax-deductible. These must be medically necessary and prescribed by a doctor. Keep all documentation to ensure your claim is valid.
6. Rental Property Deductions
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If you rent out part of your home, you can deduct expenses like repairs, insurance, and property management fees. These deductions help offset rental income, reducing your taxable amount. Always keep records of your rental-related expenses for accurate reporting.
7. Mortgage Insurance Premium Deduction
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You may be eligible for a tax deduction if you pay private mortgage insurance (PMI) on your home loan. This benefit applies to qualified homeowners, depending on income limits. Checking if you qualify can lead to extra tax savings.
8. Casualty and Theft Loss Deduction
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Losses from natural disasters, theft, or vandalism may be deductible if they exceed a certain threshold. The IRS requires you to file an insurance claim before claiming the deduction. Keeping detailed records of the loss and repair costs is crucial.
9. Interest on a Home Equity Loan
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Interest paid on a home equity loan or line of credit may be deductible if used for home improvements. The IRS requires the loan to be used specifically for upgrading the property. Using the funds for personal expenses will not qualify.
10. Depreciation for Rental Properties
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Landlords can deduct property depreciation over time, reducing taxable rental income. This deduction accounts for the gradual wear and tear of the building. Proper calculations and documentation are required to claim it correctly.
11. Home Sale Exclusion
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If you sell your home, you may exclude a portion of the profit from capital gains taxes. Homeowners who meet the residency requirement can avoid paying taxes on gains up to a certain amount. This can be a significant financial benefit when selling a primary residence.
12. Moving Expenses for Military Members
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Active-duty military members who relocate for service-related reasons can deduct moving expenses, including transportation, lodging, and storage costs. Keeping receipts and documentation is essential to claiming this deduction.
13. Homeowners Association (HOA) Fees
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HOA fees may be deductible if you rent out part of your property. These costs can be included as rental expenses, reducing taxable income. Homeowners using their property solely as a residence do not qualify.
14. State-Specific Tax Credits
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Some states offer additional property tax credits or exemptions for homeowners. These vary by location and may include benefits for seniors, veterans, or low-income residents. Checking state-specific tax laws can help maximize savings.
15. Loan Discount Points Deduction
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Homebuyers who pay discount points upfront to lower their mortgage interest rate may qualify for a deduction. This upfront cost can reduce interest payments over time while providing tax benefits. Knowing how to report this deduction correctly can help homeowners save.
16. Green Energy Tax Credits
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Homeowners who invest in renewable energy sources like solar, wind, or geothermal systems may qualify for tax credits. These credits directly reduce tax liability and encourage sustainable energy use. Checking IRS guidelines helps determine eligibility.
17. Disaster Relief Grants and Deductions
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Federal disaster relief grants may not be taxable, and additional deductions apply for losses not covered by insurance. Homeowners affected by declared disasters should review IRS rules for claiming deductions. Proper documentation is required to receive tax benefits.
18. Tax Deductions for Landlords
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Rental property owners can deduct various expenses, including advertising, repairs, and legal fees. These deductions lower taxable rental income, making property management more cost-effective. Keeping clear records of all expenses is essential.
19. Charitable Contributions of Property
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Donating property or land to a qualified charity may provide a tax deduction based on the property’s fair market value at the time of donation. Ensuring proper documentation and valuation is key to maximizing this tax benefit.
20. Mortgage Forgiveness Debt Relief
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Homeowners who have mortgage debt forgiven may be eligible for tax relief under certain conditions. The Mortgage Forgiveness Debt Relief Act excludes some canceled debt from taxable income. Checking IRS rules helps determine if this applies to your situation.