Now that we’re fully entrenched in the new year, tax time is right around the corner. And, if you’ve been considering a new home, 2020 could be a good year to make the move – especially if you’re a fan of paying less in income tax.
The Tax Cuts and Jobs Act that was passed in the waning hours of 2017 implemented some big changes. But homeowners can still come out ahead. For instance, if you have a home mortgage that is less than $750,000, you are allowed to deduct the interest.
Plus, if you have a home equity line of credit, or HELOC, the interest you pay on it is also deductible, provided that this loan combined with your mortgage still falls under the $750,000 limit. In this case, the funds from the HELOC also must be used for home improvement needs.
When it comes to building a new home, many of the costs that you incur won’t be tax deductible – unless you itemize so that you can write off at least some of the building expenses. For instance, no part of your home’s down payment is deductible. Neither are the settlement / closing cost.
However, if you took out a construction loan for building your new home (and you itemize your deductions), the interest that you pay on that loan is deductible during the first 24 months. It is important to note, though, that you can only deduct this interest if the new home is going to be either your primary or your secondary residence.
There are also some “environmentally friendly” items that may be deductible on your tax return, such as installing energy-efficient HVAC systems and/or insulation. These tax breaks are only available in certain local areas, though, so be sure to check on these with your tax advisor.
If you’ve got questions about building a home in Orlando or the surrounding Central Florida area, we’re here to help. We’ve been helping people build their dream homes for over a decade – and we’re assist if you’re ready to move forward.