first home by essentially subsidizing the loan. The MCC program is designed to help first-time home buyers offset a portion of their mortgage interest on a new mortgage to help them qualify for a loan. Because it’s a tax credit and not a tax deduction, mortgage lenders will often incorporate the estimated amount of the credit (prorated on a monthly basis) as additional income to help the potential borrower qualify for the loan. Depending on the price at which you purchased your home, you can get back up to 30% of the interest you pay as a tax credit. The program is administered by local authorities and can vary according to the state in which you live. To qualify for this tax credit, you’ll need an MCC issued by the local government, which your loan officer may or may not know how to do. Home improvements. Improving your home will not only add to its livability and comfort, it could also earn you tax deductions in multiple ways. You can use a home improvement loan to finance the cost of improvements on your primary or secondary home, which will then likely qualify you for mortgage interest deductions. The interest on a home improvement loan is deductible in full, up to a sum of $100,000 in debt. Be sure to keep track of home improvement costs. When you sell the property, if the selling price of your home is more than what you spent to procure it, the extra amount will be considered taxable income. You can add the improvement cost to the value of your property to reduce the amount of this taxable income. This can help you save money in taxes following the sale. Home office deduction. If you are self-employed and work from home, the amount of space in your home that’s dedicated towards business activities is tax deductible. This deduction will include loan interest, insurance payments, utilities, repairs, and more. However, with the TCJA going into effect for 2018 - 2025, people who are not filing as self-employed are ineligible for the deduction. There are other specific guidelines for taking advantage of this deduction, so check with your professional tax preparer before filing. Home energy tax credits. The IRS rewards homeowners who
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