The homeowner’s guide to taxes

Being a homeowner usually has some great perks- especially when it comes to filing your taxes. Make sure to talk to your tax professional about how tax law effects your specific situation, but many states and locales offer first-time homebuyer credits (sadly, the District of Columbia no longer has such a credit for the majority of buyers**) as well as other benefits that may make owning a home work to your advantage.

The DC Homestead Deduction

Before even filing your taxes, DC homeowners should consider applying for The Homestead Deduction on their property taxes. This deduction reduces your real property's assessed value by $71,700. To qualify, homeowners must:

1. Primarily reside at the property

2. Own the property, which must contain no more than 5 dwelling units, and

3. Submit an application to the Office of Tax and Revenue

Applications received between October 1 and March 31 will receive the Homestead benefit for the entire year (and all years thereafter), while applications received between April 1 and September 30 will receive a half-year credit, with a full year credit commencing the following year (and all years thereafter). For more information, visit the DC Office of Tax and Revenue website.

Federal Tax Return Deductions

Most homeowners who have not previously itemized their deductions will find that doing so will likely result in a smaller tax bill or larger refund. Deductions available to homeowners in particular include:

1. Mortgage interest, on up to $1 million of debt used to buy or improve your home

2. Points

3. Local property taxes

4. Mortgage insurance premiums, with the write-off phased out based on income

Penalty-free IRA payouts

Need to dip into your IRA to help you come up with your down payment? First time home buyers are not penalized the typical 10% for using their IRA savings for such a purpose, though the withdrawal amount may be taxed as income.

Energy credits

Up to 10% of the price of qualifying outside doors and windows, energy-efficient skylights, windows, insulation systems, roofs, air conditioners, furnaces, heat pumps, water heaters and water boilers can earn you an energy tax credit of up to $500. Another credit for 30% of the price of more expensive energy-efficient equipment, like qualifying water heaters and solar-powered generators, can reduce your tax bill further.

Other tax credits may be available to you. For more information, speak to your tax professional and visit the IRS website or a tax preparation website, such as Turbotax. 

**Employees of the District may be eligible for the Employer Assisted Housing Program.