One perk of being a homeowner is that you can benefit from exclusive tax breaks that make owning a home more affordable! With thousands of dollars shaved off your IRS bill each year, tax write-offs for homeowners in Colorado are a major win. This article will go over the main tax benefits homeowners can qualify for.
Interest paid on home loans is deductible! You can claim up to $1 million for a principal residence plus a second home. You’ll need to itemize your income taxes to claim this, so consult your accountant before filing your taxes.
Property taxes on real estate are fully deductible. When you buy a home, check the settlement sheet to see what property taxes were paid by the seller. Sometimes sellers prepay for a portion of the period the buyer owns the home. You can deduct any amount you pay throughout the year.
Colorado homeowners can reduce mortgage payments through loan points purchased when they buy their homes. One point is equivalent to 1 percent of your mortgage amount.
Whether you are taking the first loan or refinancing your home, you should take advantage of this incentive. You are allowed to deduct the loan points over the life of the loan if you have refinanced your home.
Loan points will benefit you in the following ways:
- Reduced payments
- Reduction of the total cost of your home
- Opportunity to prepay interest on your loan
- Loan points are tax deductible!
Credit for green improvements technically isn’t a tax break, but it’s a credit that similarly benefits homeowners in Northern Colorado. Homeowners can take up to $500 off their federal income tax each year for making certain improvements that increase the energy efficiency of their homes. These include such improvements as upgrading water heaters, roofing, and insulation. Learn more about this credit from the official website.
Home Improvements for Medical Reasons
Many modifications you make to your home are also tax deductible. Tax write-offs for homeowners in colorado include home improvements that make your house more accessible to those with disabilities. The home modification tax credit allows for up to $5,000 for each person in the family with a disability.
Investment Property/ Rental Property
The cost of maintaining and marketing a rental property can be deducted from the income the property generates without regard to the owner’s tax status. These expenses include mortgage interest payments, insurance, utilities, maintenance, repairs, advertising costs, and management fees.
Tax-free rental income
Renting out your home part-time is more common than ever. You’ll have to pay taxes if this is a regular occurrence. However, if you rent out your home for 14 or fewer days during the year, your rental income is tax-free.
You can deduct the costs of a home office that you use exclusively as your principal place of business. Especially in 2022, when many people are working from home, it’s worth dedicating a room to this purpose so you can claim the benefits.
Before you claim any of these tax write-offs for homeowners in Colorado, consult an accountant or tax expert. Remember that you are also entitled to standard deductions that could make better financial sense than those listed above. A tax expert will help you compare your options and make the right decision for your specific situation. I’m no tax expert, but I’m always happy to share my real estate insights with new homeowners. Get in touch, and we can discuss possible tax breaks for your family!
I'm Lauren Haug! I'm a teacher-turned-real estate agent, and I teach people how to build wealth through real estate in Northern Colorado.
schedule your free consultation