Tax Write offs for Buyers and Sellers

For the 2024 tax year, buyers and sellers of real estate can take advantage of several tax write-offs when filing their IRS returns. Below is a breakdown of key deductions and tax benefits for both:

For Homebuyers:

1. Mortgage Interest Deduction

   • Buyers can deduct mortgage interest on loans up to $750,000 for primary and secondary homes (if married filing jointly; $375,000 if filing separately).
   • For loans before Dec. 15, 2017, the limit is $1 million.

2. Property Taxes (State and Local Tax (SALT) Deduction)

   • Buyers can deduct up to $10,000 in state and local taxes, including property taxes.

3. Mortgage Points (Discount Points)

   • If a buyer pays points to lower their mortgage rate, they can deduct them in the year of purchase.

4. Private Mortgage Insurance (PMI) Deduction

   • PMI is deductible if the adjusted gross income (AGI) is $100,000 or less ($50,000 if married filing separately).

5. Energy-Efficient Home Improvements (Residential Clean Energy Credit)

   • Buyers can claim 30% of the cost of solar panels, energy-efficient doors, windows, and home batteries.

6. Home Office Deduction (If Self-Employed or Running a Business from Home)

   • If a buyer uses part of their home exclusively for business, they may deduct related expenses.

For Home Sellers:

1. Capital Gains Tax Exclusion

   • If a seller has lived in the home for at least 2 of the last 5 years, they can exclude:
     • $250,000 of profit (single filer)
     • $500,000 of profit (married filing jointly)
   • Any profit exceeding these amounts is taxed as capital gains.

2. Selling Costs Deduction

   • Costs related to the sale may be deducted from the taxable capital gain, such as:
     • Realtor commissions
     • Title fees
     • Legal fees
     • Escrow and transaction costs
     • Marketing expenses

3. Home Improvements & Repairs (If Done Before Sale to Increase Value)

   • Renovations and major repairs within 90 days of selling can be deducted from capital gains.

4. Property Taxes & Mortgage Interest (Prorated for the Year of Sale)

   • Any property taxes paid before the sale date may be deducted.
   • Mortgage interest is also deductible up until the closing date.

5. Moving Expenses (For Active-Duty Military Only)

   • Moving costs for job relocation are not deductible unless the seller is active-duty military.

Additional Considerations:

• First-Time Homebuyer Credit: There is no federal tax credit for first-time buyers in 2024, but some states offer incentives.
• 1031 Exchange (For Investment Properties): If a seller reinvests proceeds from an investment property into another like-kind property, they can defer capital gains taxes.

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