San Diego Homeowner Tax Deductions and Credits in 2023 | 2024
Paying taxes is no fun, but it’s something that all of us have to do.
When you are talking about homeowner taxes, there is good news though.
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There are numerous deductions and credits to take advantage of, which should be able to save you a bit of money each year.
Here’s a look at some of the ones that aren’t too hard to qualify for.
Here's a quick rundown of our list:
• Property Taxes
• Energy Efficiency Upgrades
• Adding a Home Office
• Home Improvements
• Construction Loans
• Private Mortgage Insurance
• Natural Disaster Victim
• Renewable Energy
• First Home Purchase
• Ground Rent
• The Bottom Line
Mortgage Interest
One deduction that is fairly easy to claim is for mortgage interest.
It allows for you to take off a portion of the amount of interest you pay for your mortgage each year.
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This generally applies to your first home, as well as your second, and covers a certain amount, which is capped at $1,000,000.
This means as long as your loan wasn’t for over that amount of money, you should be able to get this deduction.
It is also important to note that this doesn’t apply to reverse mortgages.
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Reverse mortgages are considered to be loan advances so they aren’t taxable, meaning you are not allowed to deduct the interest like regular mortgages.
You will save by not having to pay tax on them, but there’s no deduction or credit to look out for.
Property Taxes
Another deduction to look out for is property taxes.
As a homeowner in San Diego County, you are allowed to deduct your property taxes each year that you own your home.
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Remember that this only applies to what was paid to your local government though, and not any extra fees that were added.
Additionally, when you first purchase a home, you can deduct any property taxes that were given back to the seller, or were paid in advance.
Energy Efficiency Upgrades
If you take the time to upgrade your home with new energy efficient windows, air conditioners, insulation, and other items, you can get yourself a tax credit.
In some cases, this also applies to appliances that have Energy-Star ratings.
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You are allowed to get a credit on 10 percent of the purchase of these materials, up to $500.
This is a good reason to consider investing in these types of products, besides just the simple fact that they can save you money in energy costs as well.
Adding a Home Office
If you intend to work from home quite often or exclusively, you may qualify for a home office deduction.
The general terms are $5 per square foot, for 300 square feet and under.
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Keep in mind that there are a lot of other rules you must follow when you have a home office in your house, so make sure you read up on the tax laws regarding them.
Furthermore, your home office will be subject to capital gains tax when you sell your property, so if you think that you’ll sell your house for a profit, you may want to rethink adding a home office.
Home Improvements
If you have to take out a loan to fix up your house, this is something that you may be able to deduct.
You will have to use the money to either make your home’s value increase or to ensure your home’s longevity.
This is also called making capital improvements.
Construction Loans
If you are trying to build a home, you might have taken out a loan to get it built.
In some cases, you’re able to deduct the interest on what is known as a construction loan.
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This is only valid for the first 24 months that you have a loan and has to be for the home you intend to live in all the time or a vacation home.
There are also other expenses and deductions that may go along with this one as well, such as moving expenses.
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Private Mortgage Insurance
In some cases, some people qualify for private mortgage insurance deductions.
This type of insurance occurs when someone bought their home with a low down payment, so there is less risk for the lender.
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At the same time, it may help you get a tax deduction, if your income falls below a certain amount.
Natural Disaster Victim
If your home has been substantially affected by a natural disaster and your county was officially declared as a disaster area, you should be able to get a deduction for that.
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This essentially applies to the difference between the amount covered by your insurance and the amount of the items you lost, as long as it was a loss.
Renewable Energy
If you decide to fit your house with renewable energy sources, such as solar panels, this may allow you to qualify for a credit on your taxes.
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It is called the Renewable Energy Efficiency Property Credit and can cover up to 30 percent of the costs involved.
First Home Purchase
If you need money to purchase a home for the first time, you are able to take a certain amount from your IRA to buy it without taking any penalties.
This helps you out when it comes to saving.
At the same time, this also applies to refinancing your home, where you’re able to get a deduction when you refinance your mortgage.
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You will need to understand how financing works to take advantage of this one however, so it is a good idea to read all the paperwork that came with your mortgage.
You should also know the terms and conditions on your mortgage, since they can change.
Ground Rent
In some cases, you may not own the land your home is on, but you do own your home.
If this is the case, you’re likely paying ground rent to the land owner, which can be deducted on your taxes.
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The lease for the land must be for more than 15 years and you must have been paying it at least annually to qualify.
The Bottom Line
These are some of the most common deductions and credits that you can take advantage of in San Diego.
Each of them have special stipulations and rules to follow, so it is a good idea to talk to your real estate agent, banker, accountant, or anyone else you trust with certain tax information for more help.
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They will be able to explain how to qualify for these programs.
Moreover, you will have to have all your deductions itemized correctly when you fill out your taxes each year, so this is something else you’ll have to learn how to do if you haven’t done it before.
This also involves having records that are easy to follow and always handy, in case you get audited or the government needs more information regarding your taxes.
What do you think?
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Your Homeowner Tax Deduction Insider,
Scott
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