Five Tax Tips for New SoCal Homeowners Straight… from Construction Experts
Buying a home is the largest investment some people will ever make. There are definite advantages over renting a home, along with some different costs and taxes. Any homeowner, especially a new one, should take advantage of all the tax credits and breaks that are available. As a long established home construction and remodeling company based out of Burbank in Los Angeles County, we are in a great position to provide some homeowner tax tips for California. Here are five that could keep a lot of money in your pocket instead of handed over to governments.
First-Time Home Buyers
When it comes to buying a home for the first time, very often getting the initial down payment can be difficult. To combat this, the IRS allows new home buyers to
withdraw up to $10,000 from their Individual Retirement Account (IRA). This will be counted as income, so it is taxable, but it may be a good option to get you started on the road to home ownership. If you combine it with doing some home improvements and remodeling, you may be able to offset that taxable amount with a home improvement loan or some energy efficient remodeling. (See below.)
More Good News About Your IRA
While the ability to access $10,000 from an IRA can be a game changer for a first-time homeowner, that isn’t the only benefit you can get. A spouse, parent, child or even grandchild can choose to kick in another $10,000 from their own accounts, making a total of $20,000 for first-time home buyers.
Home Mortgage Interest Deduction and Interest on Home Improvement Loan
The IRS offers opportunities to reduce mortgage interest. See details and qualifications here.
As is often the case with homeowners (new or seasoned), the need arises to remodel and renovate a home. The IRS considers the interest on home improvement loans to be tax deductible up to $100,000. Note that it is the interest payable, not the amount of the loan.
Home Improvement Energy Efficiency Tax Credit
If you remodel your home or make some professional upgrades that include energy efficient initiatives like solar energy systems (see below) and geothermal heat pumps, there’s a Federal tax credit available worth up to 30% of the cost. See here. There’s also a $500 tax credit for installing special insulation, biomass stoves and special roofing materials. See here. This $500 credit expires on December 31, 2016, but the larger credit is available through 2019.
Solar Power and California Go Hand-In-Hand
If you have a home in Southern California, then the ultimate homeowner tax tip is to go solar NOW. If there is one thing we have an abundance of here, it’s sunshine. The federal government’s tax incentives on the purchase and installation of certain solar systems, including energy and hot water, is a subject that your trusted and experienced SoCal home remodeling contractor knows a lot about.
For more information, here are some helpful websites.
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