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November 24, 2021

Must-Know Tax Deductions for NY Homeowners in 2021

As tax season rolls around each year, homeowners are able to take advantage of some great tax benefits if they seek professional tax advice. Tax deductibles can amount to hundreds, if not thousands of dollars each year for homeowners so it’s important to know how these deductions work. So let’s take a closer look at what household expenses are deductible this year.

Written by
Amberstone Consulting
Published on
December 8, 2021
Category
Category 2

As tax season rolls around each year, homeowners are able to take advantage of some great tax benefits if they seek professional tax advice. Tax deductibles can amount to hundreds, if not thousands of dollars each year for homeowners so it’s important to know how these deductions work.

So let’s take a closer look at what household expenses are deductible to see if it’s worth the trouble to itemize your deductions this year.

What Home Expenses are Tax-Deductible in 2021?

The majority of deductions associated with your home are tax-deductible if you choose to not take the standard IRS deduction. The most common deductions for homeowners are typically mortgage interest and property taxes. These deductions are found on the Federal return on Schedule A. 

There are also Federal credits that you can claim if you make qualified home improvements. Home improvements like new windows, siding, and a furnace are all eligible for a one-time credit that will offset your income tax liability. Even though the credit is minimal, some portion of your tax liability is better than nothing. 

What About State Deductions?

Many states have implemented certain homeowner’s credits and deductions. Depending on the state you live in, you could be eligible to deduct a portion of itemized deductions on the state return even if you took the standard deduction on the federal return. 

An example of a state deductible in New York would be the current credit available for “Solar Power” and “Green Roof”. If your home has solar panels installed on the property or has plants absorbing rainwater on the roof, then the state allows for specific credits for these. 

The “Green Roof” credit is a one-time tax break for growing plants on the roof of your home to help reduce cooling costs. This benefit is capped at $100,000 for the building in 2021. The “Solar Power” credit allows homeowners to earn some major tax breaks which also comes with good eco-karma too. Solar panels allow homeowners to save money each month on their electricity bills, but this also allows them to deduct 30% of the cost of installing the solar energy system in the state of New York.

Can You Deduct Mortgage Interest in 2021? 

As a homeowner, a large chunk of your initial mortgage payments goes towards paying interest on the loan with only a small amount going towards the principal. But the good news is that you can deduct these mortgage interest payments from your primary and secondary residence with a cap up to $750,000. 

The mortgage interest tax break applies to home purchases, refinances, or home equity lines of credit. The mortgage interest tax deduction is one of the most common deductions by homeowners. When you pay interest on your mortgage, you will receive Form 1098 from your lender, which you will then use for the corresponding tax return. Mortgage interest is deductible on the federal return if you itemize your deductions, meaning you have more in itemized deductions than the standard deduction. 

What is the Maximum Mortgage Interest Deduction for 2021?

Due to the high limit on the mortgage interest deduction, most taxpayers will not have any issues deducting mortgage interest if they itemize their deductions. The limit for mortgage interest is $750,000 for married-filing-joint taxpayers for homes purchased after December 16, 2017. The limit for couples married and filing separately is up to $375,000 for the same deductible.



There are a few exceptions to this limit as mortgages that were taken out before October 13, 1987, are considered a grandfathered debt with no limit on the mortgage interest. 

Can I deduct Property Taxes if I Take the Standard Deduction?

The other frequently used homeowner’s deduction is property taxes. Property taxes are limited to $10,000 as an itemized deduction on Schedule A. However, the majority of taxpayers in the US won’t be affected by this cap as their property taxes will likely fall below this amount. In states with high property taxes such as New York or California, the impact of this cap will be more effective.

The property assessor’s office will typically send out a statement at the beginning of the year that will show the amount of property tax due. This will then allow you to understand how much you will owe for the year.

The property tax category includes all other taxes paid too. If you don’t itemize your deductions, you are then unable to get any credit on the Federal return for property taxes paid. However, states have passed credits to include property taxes as a deduction on the state return. New York has recently passed a $250 to $350 credit for homeowners with an adjusted gross income under $250,000. 

Understanding the tax benefits surrounding homeownership is critical in order to get the maximum tax benefit. Tax law is constantly changing so be sure to check with local tax authorities and on the IRS website for the latest news.


Amberstone Consulting

If you're looking for professional finance and tax advice, Amberstone Consulting has your back with our many years of experience in helping our clients with their finances.

We are dedicated to providing expertise to your business and are on hand to manage all your paperwork and taxes. 

If you require finance and tax assistance, we encourage you to reach out to our team here today.



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