Struggling With Your Mortgage? Take Advantage Of These Tax Deductions

In the early stages of the pandemic, property sales and new construction initially stopped in the wake of economic uncertainty, which eventually led to a substantial increase in home ownership across the U.S.

An unusually heated housing market resulted from a combination of factors including historically cheap interest rates, families feeling constrained after a year of staying put and supply chain problems that made the scarcity of available houses worse.
Read more: Any Sign Of Relief In The Housing Markets? No, It Is Still Bad

Now, the Federal Reserve is currently raising interest rates to record highs in an effort to combat inflation, which is at 40-year highs and has driven up the cost of basic household items like groceries, giving new homeowners the impression that their money isn't worth as much as it did when they bought the house.

For those newer homeowners, or prospective buyers struggling with rising costs, here are some tax breaks that could help ease the pain. Of course, everyone's situation is different and these tax breaks don't apply to everyone. You should speak with a tax professional to discuss the best options for your unique situation. 

1. Mortgage Interest Deduction

You can deduct interest on up to $750,000 in debt (or $375k if you're married and filing separately) if you itemize, including debt used to purchase, construct, or significantly improve your principal residence or a single second home.

If upgrades increase the home's worth, increase its usable life, or make it suitable for new purposes, they are considered "substantial" improvements.

2. Mortgage Interest Credit

Lower-income homeowners who additionally received a qualified Mortgage Credit Certificate (MCC) from a state or local government to fund the purchase of a principal residence are eligible for a mortgage interest credit.

The credit amount ranges from 10% to 50% of the annualized mortgage interest paid.

3. Home-Office Expense Deduction

You may be eligible to deduct costs associated with using your house for business purposes if you are self-employed and operate from home.

The home-office deduction is available for homeowners and renters, and it doesn't matter what type of home you have.

4. Credits for Energy-Saving Improvements

If you install specific energy-efficient equipment in your home, the U.S. will reward you with a tax credit in order to promote the use of renewable energy sources.

On qualifying new systems that generate energy, heat water, or control the temperature in your home using solar, wind, geothermal, biomass, or fuel cells, you'll save 30%. The fuel cell equipment credit is capped at $500 for every half kilowatt of capacity.

5. Property Tax Deduction

If you itemize, Schedule A (Form 1040) allows you to deduct real property taxes.

Additionally, the total amount of state and local income, sales, and property taxes you can write off is limited to $10,000 ($5,000 if you're married but filing a separate return).

6. Make Money on Other Properties

Investing in more real estate might not sound like a feasible option when you're already dealing with the burden of inflation and higher interest rates, but fractional ownership allows you to buy shares of income-producing rental properties with as little as $100 and take advantage of additional tax benefits like depreciation. Here's how you can invest in real estate with as little as $100.

To read about the latest developments in the industry, check out Benzinga's real estate home page.