Owning a piece of West Valley real estate in Phoenix can net you some pretty nifty benefits when tax season rolls around. Naturally, owning a house or any other real estate involves a good amount of work, especially if you’re trying to put up your home for sale in Goodyear or anywhere else.
Whether you’re trying to sell your home or just make improvements to it, keep track of your expenses. If you’ve spent over $5,000 in a 24-month period, you might be eligible for a tax credit or deduction. Now, credits are different from deductions. Any amount of credit is directly subtracted from your owed total tax at the end of the year, whereas a deduction reduces your taxable income. A deduction will make your tax bill smaller, whereas a credit lowers your income tax burden, guaranteed.
Certain expenses, like mortgage interest, improvements, renovations, or repairs, can earn you deductions. The IRS also offers credits to real estate owners who are willing to rehabilitate some properties, both residential and non-residential. This credit can be worth anywhere between 10% and 26% depending on several factors, such as whether the house was put into use before 1936, whether it’s a certified historic structure, or if it’s in a disaster area, like those damaged by hurricanes or other similar events.
There is also a program called the Low-Income Housing Tax Credit program, overseen by the U.S. Department of Housing and Urban Development, that’s purpose is to encourage residential developers in the private sector to build affordable housing. The builders are given tax credits, who in turn sell them to investors in order to raise money for low-income housing. For each dollar invested, the investors can benefit from these real estate tax credits for 10 years, so long as the building meets the program qualifications. In order to qualify, the real estate must be residential, rent controlled, and meet low-income tenant eligibility.