4 Tax Deductions That Are Amazing For Homeowners

Tax season is here, but there is still time for homeowners to maximize their tax savings. Here are tips to help you reap home-related deductions. 

The Holy Grail of All Tax Deductions:  Mortgage Interest

The most significant tax deduction available for many people is based on the interest paid for their home mortgage. The mortgage tax deduction  can be for interest paid on loans for no more than two residences. That could be any combination of a primary residence, second home, vacation home, or potentially even a boat, or recreational vehicle, provided there is plumbing and a bathroom.

For those lucky enough to own more than two properties, make sure to use the deductions from the property that will yield the largest tax deduction. People often assume that the biggest mortgage payment will produce the most significant tax deduction, but that is not always the case. Generally, more of your payment is applied to the principal, and less to interest, the longer you’ve had your mortgage.

If you had your mortgage before December 15, 2017, it is grandfathered in under the old rules for home acquisition debt of $1 million, or less. The rules changed after that date and now, married couples are limited to a debt of $750,000 when accounting for their mortgage deduction. However, two single people can each own a portion of a home and each claim up to $750,000 each. Of course, that assumes you are able to own a property valued at more $1.5 million, which is not that big of a stretch in many markets like New York City, Los Angeles, San Francisco, or even Seattle. The drop in the mortgage deduction limit is another way Donald Trump screwed homeowners in expensive areas.

Related: Is My HELOC Still Tax Deductible?

The Dreaded Home Office Deduction

This tax deduction has been used and abused, which is why it has rightfully earned its reputation as a potential audit trigger. That doesn’t mean you should completely ignore this often valuable tax deduction for self-employed homeowners. If you are reasonable and use a room (or rooms) in your home exclusively for business, you should consider it. If you are actually using half your home to run your business, make sure you document your use, and expenses, and take the home office deduction. Please don’t try and claim you use half your home for a side hustle that barely brings in money. That is especially true if you live with your wife and 12 children. Unless your home is huge, it will be hard for an IRS auditor to believe you actually dedicated 50% of your home exclusively to your business.

A simpler and easier way to estimate your home office deduction was enacted in 2013. It allows homeowners to deduct $5 per square foot of home office space, but the entire deduction is limited to $1,500. While I don’t think a $1,500 tax deduction will change your life, it will save you money and time versus the hassle of tracking every little expense.

Do You Use Airbnb or Have Roommates?

Over the past few years, more people have turned their homes into a cash machine by renting rooms in their homes, both short-term and long-term (Golden Girls anyone). Part-time landlords often miss out on tax breaks that benefit landlords who rent their entire properties. First, I would like to point out that yes, the profit you make renting out a room in your home is taxable. Anything more than 14 days in a given year needs to be reported to the IRS, and taxes may be due. If you have reported income, you should also have some tax-saving deductions. The landlord expenses may be prorated depending on rental frequency. Some costs you may be able to deduct as a landlord might include patio furniture, internet, cable, house cleaning and even pool maintenance or laundry.

Related: Tips For Smart Home Buyers

Do Good for the Environment, Get A Tax Break

There is a slew of tax deductions for making your home more energy-efficient. I won’t bore you with a ton of details, but if you’ve done the good deed for the environment make sure you get your tax savings. Before taking on a green project, make sure to check, double-check, and triple check the specific requirements and deadlines required to receive any potential tax breaks.  Think of things like solar panels or drought tolerant landscaping, even rain barrels may qualify.

Tax Break When You Sell Your Home

The rules for taxation of a home sale are pretty clear cut, yet we continue to see much confusion around this topic.

Thanks to President Bill Clinton and the Taxpayer Relief Act of 1997, most homeowners will not owe any capital gains taxes on profits when selling their primary residence. The short version of the rule is that if you have lived in your primary residence two of the past five years, you can exclude up to $250,000 of profits from being taxed. If you are married, that number doubles to $500,000. 

Your profit on a home may not be as straightforward as subtracting your purchase price from your sale price. For example, if you paid $250,000 for your home 20 years ago and sold it for $1 million, your profit for tax purposes is not necessarily $750,000. You will likely have closing costs and commissions for realtors. Also, keep in mind any home improvements you may have made over the years, which can also increase your home’s cost basis.

Over the long-term, owning a house can be a great way to build wealth. However, it has the potential to be a budget buster along the way. Getting some nice tax breaks during your journey could help to ease the pain of paying for a new water heater or sewer pipe. Keeping good records will make finding your tax deductions easier come tax time. Also, keep a list of home improvements. They will help to further minimize taxes owed when you eventually sell you home.

This post first appeared on Forbes.com. To see the original, click here.