Top 10 Tax Deductions Perfect for Georgia Homeowners!
There are many advantages of homeownership. And interestingly, tax time offers many advantages.
The tax code favors homeownership, so there are ample tax deductions only applicable to homeowners.
In fact, according to Robert Moss, the national director for government affairs at CohnReznick, which is an accounting and tax advisory firm:
"(The code) is completely skewed [towards homeowners]. There is not a direct way in the code to get a direct tax benefit from renting."
For example, here are 10 common home related tax deductions that are not available for renters.
Although tax credits and rebates vary from state to state, there are dozens of local and federal tax deductions available to homeowners. Keep in mind that everyone has a different financial situation, so it is important to consult a tax professional to understand how any tax deductions or other financial incentives impact your personal situation.
Tax Deductions For Homeowners
TurboTax details some major homeownership tax benefits, however, keep in mind that every individual may have unique circumstances. These homeownership tax deductions are applicable to most people, with a couple of caveats.
1. Mortgage Deduction
The most notable of the homeowner tax deductions is the mortgage payment interest deduction, which covers interest paid on the first $1 million of home loans, which is particularly valuable for first-time homeowners. However, additional mortgage-related tax deductions and financial incentives exist as well.
2. Property Tax Deduction
Beside the mortgage interest deduction, the other major tax break is property taxes. If you maintain an escrow account as part of your monthly mortgage payments, then you'll notice most of the payment is taxes. When the lender provides your annual statement, the statement breaks out the taxes for inclusion as an annual deduction.
For first-time homeowners, then review the settlement sheet, which includes additional tax payment data. When the property was transferred from the seller to you, the year's tax payments were divided so that each of you paid the taxes for that portion of the tax year during which you owned the home. Your share of these taxes is fully deductible. Deduct property taxes as part of the itemized expense on Schedule A.
3. Home Improvement Loans
Many home improvement projects are quite costly and homeowners take out a loan to complete the work and the interest paid is a tax deduction. For any qualifying loans, which means money that adds "capital improvements" to your home, meaning the improvement must increase your home's value, adapt it to new uses, or extend its life.
Examples of capital improvements include:
- Adding a third bedroom
- Adding a garage
- Installing insulation
Tax experts also point out that qualifying loans do not apply to basic repairs and fixes. However, distinguish between these two types of work because only the interest on loans taken out for home improvements remain deductible.
4. Solar Energy Tax Credits
The Energy Policy Act of 2005 established a federal tax credit for residential properties that are applied to solar-electric systems, solar water heating systems and fuel cells. In 2008, the tax credit extended, which included small wind-energy systems and geothermal heat pumps.
Homeowners may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The maximum allowable credit, equipment requirements, and other details vary by technology but are mainly applicable to the following upgrades.
- Solar-electric property
- Solar water-heating property
- Fuel cell property
- Small wind-energy property
- Geothermal heat pumps
Jayson Mullin, founder of Top Tax Defenders, explains the benefits:
"You could save up to 30% of the total cost of installing certain renewable energy sources in your home. The 30% credit applies to the cost, including labor and installation, and must be taken in the year the item was placed in service."
5. FHA Energy Efficient Mortgages
Homeowners can take advantage of energy efficient mortgages to either finance energy efficiency improvements to existing homes, including renewable energy technologies or to increase their home buying power with the purchase of a new energy-efficient home.
The U.S. federal government supports these loans by insuring them through Federal Housing Authority (FHA) or Veterans Affairs (VA) programs, which allows borrowers who might otherwise be denied loans to pursue energy efficiency, and it secures lenders against loan default.
The FHA allows lenders to add up to 100% of energy efficiency improvements to an existing mortgage loan with certain restrictions. FHA mortgage limits vary, but the maximum amount of the portion of an energy efficient mortgage allowed for energy improvements is now the lesser of 5% of:
- The value of the property.
- 115% of the median area price of a single-family dwelling.
- 150% of the Freddie Mac conforming loan limit.
For more information, then please review the HUD website for more details.
6. Energy Star Partnerships
To promote energy-efficient mortgages and lenders who offer them, the Energy Star program offers a partnership program for lenders who provide energy-efficient mortgages to borrowers. In order to maintain their partnership benefits, lenders must write a certain number of energy-efficient mortgages per year, so please review the program information to access the partner locator tool.
Tax Deductions for Georgia Homeowners
As a Georgia homeowner, there are a few tax deductions and other financial incentives provided to state residents. In general, most tax deductions relate to mortgages and energy efficiency. For example, Georgia Power provides rebates and other incentives for its residential customers to purchase certain energy-efficient equipment.
7. PowerSaver Loan Program
The Federal Housing Administration (FHA) through its PowerSaver loan program offers three financing options for homeowners to make energy efficiency and renewable energy upgrades in their residences.
For all three PowerSaver products, borrowers must select from a list of approved PowerSaver lenders and meet certain eligibility requirements, such as minimum credit score, debt-to-income ratio standards, among others.
Eligible home energy upgrades include the following:
- A whole home upgrade through Home Performance with ENERGY STAR.
- Insulation and air sealing.
- Replacing doors and windows.
- Upgrading heating, ventilation, and air-conditioning systems and hot water systems.
- Home automations systems and controls (e.g., smart thermostats).
- Installing solar photovoltaic (PV) systems, solar thermal hot water systems, small wind power, or geothermal heat pumps.
Interested homeowners should check the program for the loan details, but the principal options include a PowerSaver Home Energy Upgrade (up to $7,500), PowerSaver Second Mortgage (up to $25,000), and PowerSaver Energy Rehab.
8. Residential Energy Efficiency Loans
The Georgia Environmental Finance Authority (GEFA) encourages Georgians to utilize zero-interest financing options to help make their homes more energy-efficient and save on utility bills.
For customers of multiple local utility companies financing is available to complete a variety of upgrades and improvement, such as:
- Air sealing and insulating homes.
- Installing energy-efficient HVAC systems.
- Purchasing eligible Energy Star appliances.
Loans of up to $5,500 are available and must be repaid within 36 or 60 months, depending on which of the three program administrators issues the loan.
9. Access Solar Energy Easements
In determining that the use of solar energy "can help reduce the nation's reliance upon imported fuels," Georgia encourages the development of solar-energy systems. Accordingly, under Georgia's Solar Easements Act of 1978, easements may be established to allow owners of solar-energy systems to negotiate for assurance of continued access to sunlight. Create any easement in writing as these remain subject to the same requirements as all other legal easements.
The easement must contain:
- A description of the airspace affected by the easement.
- Any terms and/or conditions under which the easement is granted or will be terminated.
10. Marietta Power & Water Rebates
Marietta Power & Water provides rebates for electric water heaters ($250), along with electric and dual-fuel heat pumps ($150). If both a water heater and heat pump are installed simultaneously, a rebate of $500 is available.
Homeowners install electric and dual-fuel heat pumps in newly constructed homes or replace an existing residential gas system. The developer, owner, or builder must request to participate in this program before replacing or installing any new electric appliances and must enter into the program by signing MP& W's contract.
The developer, owner, or builder must schedule with a utility representative an inspection date for the unit after installation. For more information, check out the program guidelines.
Of course, additional programs provided by the private sector aid in increasing energy efficiency and reducing utility costs. Although they may not impact your home improvement tax deductions, they contribute to saving money over time.
For example, Snappy Electric, Plumbing, Heating, & Air offers home energy solutions that identify inefficient areas in your home and provides recommendations to address any issues. Our checkups focus on the following:
- Provide a Whole-House Energy Assessment
- Improve Energy Efficiency
- Reduce Energy Usage
- Lower Monthly Utility Costs
Although we can't help with the mortgage or property tax deductions, we can help with the energy efficient upgrades. We specialize in installation and repair, so Snappy Electric, Plumbing, Heating, & Air has the experience and expertise to help with any HVAC or electrical needs, so call us today!