Here's why some homeowners' tax refund may be bigger this year
It's tax time again - and that means you could receive extra money soon. That's because the majority of Americans receive a tax refund according to the IRS. However, the size of the refund you receive depends on a wide range of factors. Things like how much money you earned, how much you paid into taxes and what expenses you faced throughout the year all play a role.
Moreover, if you're a homeowner, you may be able to increase your tax return even further. Homeownership comes with several potential deductions. In fact, some homeowners are in for a bigger tax refund this year.
Find out how big your tax refund can be now.
Why some homeowners' tax refund may be bigger this year
If you're like most people, you want the biggest tax refund possible, and if you're a homeowner, you could be in for a bigger refund than you initially expected. Here are three homeowner-related tax deductions that could considerably boost your return:
The mortgage interest deduction
If you have a mortgage on your home, you can deduct your mortgage interest to reduce your total tax liability. If you purchased or refinanced your home recently, chances are that you have a relatively high interest rate. Thanks to inflation and continuous rate hikes courtesy of the Federal Reserve, mortgage interest rates surged in 2023, hitting their highest point since 2000. And while they've come down a bit since they're still much higher than they were in recent years, meaning that many homebuyers paid significantly more in interest last year than they would have in prior years.
Although a high mortgage rate may be a negative when it comes to your mortgage payments, it could work to your advantage during tax season. Keep in mind, the more mortgage interest you pay, the higher your related tax deduction.
Simplify your deductions with Tax Slayer today.
Energy efficiency tax advantages
Making energy-efficient home renovations can have a profound impact on your tax refund as well. For example, the federal solar tax credit can reimburse you between 22% and 30% of the total cost of your recently-installed photovoltaic (PV) solar system according to the U.S. Department of Energy - depending on the installation year. You may qualify for other energy efficiency-related tax credits as well.
Home renovation deductions
Although you can't deduct all renovations, there are some instances where home renovations can boost your tax return. For example:
- Home office renovations: Did you renovate your home office to make it more of a work environment? You may be able to write the costs associated with doing so off.
- Medical needs renovations: If you installed handrails in your bathroom or a ramp that leads to your front door to address a medical accessibility need, or you made any other renovation to your home to address a medical need, you may be able to write the cost of the renovation off on your tax return.
- Rental property improvements: Do you rent out your mother-in-law suite, closed-in garage or another portion of your home? If so, any renovations you make to that area of the home may qualify for rental property improvement deductions.
- Home equity-related interest: You can't always write off interest on home equity loans and home equity lines of credit (HELOCs), but if you use the money you receive from these loans to renovate your home, you may be able to.
How to get the most out of your homeowner-related tax deductions
The larger the deductions you take, the larger your tax refund generally will be. So, you generally want to deduct as much as possible. Here are a few tips to help you get the most out of your homeowner-related tax deductions:
- Use a reputable tax filing solution: Software solutions like TurboTax, Tax Slayer and H&R Block have been around for years and have helped millions of consumers file their tax returns. The makers of these programs understand the complexities of the U.S. tax code and what questions need to be asked for you to receive the highest possible refund. And they make it easy to file your own taxes with confidence.
- Speak with a tax professional: If you're unsure of what deductions you can - or should - take advantage of, consider reaching out to a tax professional. It may not be as expensive as you think. In fact, with TurboTax, professional assistance could be free - and if you don't qualify for the free service, you're unlikely to spend more than $169.
- Keep invoices and receipts: Any time you make a change to your home that may qualify for tax incentives, keep the receipts and invoices. You may need these to prove your expenses later on.
The bottom line
If you're a homeowner, there's a high likelihood that you can take advantage of tax deductions relating to your home, especially if you bought your home in 2023 and have a higher-than-usual mortgage interest rate. Tap into those deductions with a leading tax solution to expand your 2023 refund.
