Tax Season and Homeownership: What Triangle Homeowners Need to Know for 2025

Tax season is upon us, and as a homeowner in North Carolina's Triangle area, it's essential to understand how your property can influence your tax situation. Owning a home offers several tax benefits, but navigating them can be tricky. Let's break down the key points to help you maximize your savings this year.

 
1. Mortgage Interest Deduction: A Significant Benefit

One of the most substantial tax perks for homeowners is the mortgage interest deduction. If you itemize your deductions, you can deduct the interest paid on your mortgage, which can lead to significant savings.

For mortgages taken out after December 15, 2017: You can deduct interest on up to $750,000 of mortgage debt. 

For mortgages taken out before this date: The limit is higher, allowing deductions on up to $1 million of mortgage debt.
To claim this deduction, ensure you have Form 1098 from your lender, detailing the interest paid over the year.

 
2. Property Tax Deduction: Know the Limits

As a homeowner, you're likely paying property taxes to your local government. The good news is that these payments are deductible on your federal tax return, but there's a cap.

Deduction Limit: You can deduct up to $10,000 ($5,000 if married filing separately) for the total of state and local property taxes, along with income or sales taxes.

Remember, to benefit from this deduction, you'll need to itemize your deductions rather than taking the standard deduction.

 
3. Energy Efficiency Credits: Save Money and the Environment

Thinking about making your home more energy-efficient? The federal government offers incentives that can lighten your tax burden.

Energy Efficient Home Improvement Credit: This credit allows you to claim 30% of the cost of eligible home improvements, such as installing energy-efficient windows, doors, or HVAC systems, up to a maximum of $3,200 annually. 

Residential Clean Energy Credit: If you're considering renewable energy installations like solar panels, you can also claim 30% of the cost for these improvements. 

These credits not only reduce your tax bill but also contribute to long-term savings on utility bills.

 
4. Home Office Deduction: For the Remote Workers

With the rise of remote work, many homeowners have dedicated spaces for their professional activities. If you're self-employed and use part of your home exclusively for business, you might qualify for the home office deduction.

Simplified Method: Deduct $5 per square foot of your home office, up to a maximum of 300 square feet, resulting in a maximum deduction of $1,500.

Ensure that the space is used regularly and exclusively for business purposes to qualify.

 
5. Capital Gains Exclusion: Benefits When Selling Your Home

Planning to sell your home? The IRS provides a favorable exclusion for capital gains on the sale of your primary residence.

Exclusion Amount: You can exclude up to $250,000 of capital gains from your income ($500,000 for married couples filing jointly), provided you've lived in the home for at least two of the five years preceding the sale.

This exclusion can result in substantial tax savings when you decide to move.

 
6. North Carolina Specific Benefits: State-Level Perks

Beyond federal deductions and credits, North Carolina offers state-specific benefits for homeowners.

NC Home Advantage Tax Credit: If you're a first-time homebuyer or military veteran, you might be eligible for a Mortgage Credit Certificate (MCC), allowing you to claim a federal tax credit for 30% of the interest you pay on an existing home (up to $2,000 per year). 

Property Tax Relief Programs: North Carolina provides property tax relief for eligible homeowners, including the elderly and disabled. For instance, the Homestead Property Exclusion allows qualifying individuals to exclude a portion of their home's appraised value from property taxes. 

It's worth exploring these state programs to see if you qualify for additional savings.

 
Final Thoughts: Stay Informed and Seek Professional Advice

Tax laws can change, and individual circumstances vary, so it's crucial to stay updated and consult with a tax professional to ensure you're maximizing your benefits. By understanding and leveraging these deductions and credits, you can make the most of your homeownership during tax season.

Remember, while taxes might not be the most exciting topic, the savings they can bring are certainly worth the effort. Happy filing!