We’ve teamed up with Kelly S. Nagel, CPA from Innovative Tax and Accounting Solutions to bring you some important benefits you’ll want to know if you are a homeowner or you are thinking about becoming a homeowner!

From Kelly: Being a CPA, I have a unique perspective about home ownership. I’ve seen tax savings range from first-time homeowners to those who sell and have an optimum return on their investment.

Owning a home can be a great opportunity to utilize our current tax code. Here are just a few things you should consider:

What are the Advantages of buying?

  • Cost of ownership can be less than renting
  • Fixed mortgage (No Rental Increases)
  • Owner controls property
  • Freedom to redecorate, remodel, or make improvements
  • Improve credit rating
  • Real estate can be good investment

What are the Tax advantages?

  • Mortgage deduction (there are certain exclusions)
  • Property tax deduction
  • Exclusion of gain on sale (primary residence only subject to limitations)
  • Mortgage tax credit for those who qualify

What are Possible Sources for a Down Payment? You can reduce your savings or utilize one or more of these strategies involving retirement plans:

  • First time home buyer assistance from Retirement Plans:
    • $10,000 from IRA accounts – still taxable if from a Traditional IRA but no 10% penalty,
    • If from a Roth IRA, it may or may not be taxable (consult a professional for guidance)
  • Retirement Plan Loans: $50,000 limit or 50% of balance of a current employer retirement plan

What about Energy Credits? Two energy-related credits are available to be claimed in the year the taxpayer makes a qualifying improvement to their primary home:

Energy Efficient Home Credit (EEHC) : Maximum credit each year is $1,200 for energy property costs and certain energy efficient home improvements:

  • Exterior doors capped at $250/door and $500 (total)
  • Windows, skylights capped at $600
  • Home energy audits capped at $150
  • Insulation materials Central air conditioners
  • Heat pumps and heat pump water heaters
  • Biomass stoves and boilers
  • $2,000 cap per year for qualified heat pumps, biomass stoves or biomass boilers

NOTE: No lifetime dollar amount but the credit is a certain percentage of total cost of the improvements, and some are capped as listed above among other provisions

Residential Clean Energy Credit: For tax years 2022-2032 – the percentage is 30% and applies to:

  • Solar, wind and geothermal power generation
  • Solar water heaters
  • Fuel cells, and
  • Battery storage

NOTE: No annual maximum or lifetime limit but there are credit limits for fuel cell property

I encourage all of you to contact your tax professional for more information about potential tax savings and tax credits so you understand what criteria is needed and what restrictions there may be. I have also listed a few links below that might be useful.

Happy Home Ownership!

Kelly S. Nagel, CPA
Innovative Tax and Accounting Solutions

Available Resources:
IRS Tax Tip 2023-96 (July 27, 2023) https://www.irs.gov/newsroom/homeowners-review-these-house-related- deductions-and-programs
IRS FAQ Energy Efficient Home Improvements and Residential Clean Energy Property Creditshttps://www.irs.gov/pub/taxpros/fs-2022-40.pdf
IRS Publication 936 – Home Mortgage Interest Deductionhttps://www.irs.gov/pub/irs-pdf/p936.pdf

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