Home Buying 101: Tax Benefits for Florida Homeowners

Posted: February 6, 2020 | Categories: General Info | Home Buying 101
By Highland Homes

Florida among states with lowest taxes in the nation

Updated for the 2019 Tax Year

Owning your own home in Florida comes with many perks, from being a haven for your family to increasing your net worth. And this time of year, a benefit on the minds of many is the tax benefits of homeownership.

Good news - There are an array of tax deductions available to Florida homeowners that can add up to big tax savings if you itemize your 2019 income tax return!

According to the official IRS Publication 530 and the tax experts at TurboTax, here’s an outline of the tax benefits you are eligible to receive when you own a home in Florida and file a Schedule A for Itemized Deductions on your tax return.

Mortgage Insurance Premium (MIP or PMI)

Big news – the itemized deduction for mortgage insurance premiums, which was expired during the 2018 tax year, has been reinstated by Congress meaning homeowners who pay PMI, MIP, or a VA funding fee may be able to deduct this on your 2019 income tax return! In addition, if you were a homeowner during 2018 and qualify for the deduction, you are eligible to amend your 2018 tax return to include the mortgage insurance premium deduction. 

In order to be fully deductible, your mortgage must have originated since January 1, 2007, and your Adjusted Gross Income (AGI) must be $100,000 or less if filing jointly, or $50,000 or less if married filing separately. The deduction is reduced for incomes exceeding that, and eliminated for those with an AGI greater than $109,000 ($54,400 married filing separately). 

Mortgage Interest

Mortgage interest is a part of your monthly mortgage payment. If you are the primary borrower — the person legally obligated to the debt — then you may be able to deduct mortgage interest on your federal tax return.

If you purchased your home after December 15, 2017, you can deduct interest on the first $750,000 in mortgage debt ($375,000 if married filing separately). If you purchased your home prior to December 15, 2017, the deduction is available on up to $1 million in debt.

In order to be deductible, the interest must be on a loan for your primary residence or a second home. The deduction is available whether it is a first or second mortgage, home improvement loan, home equity loan, or a refinanced loan. However, one of the biggest changes from previous tax years is the loan must have been used to buy, build, or substantially improve your home for the interest to be deductible.

There is also good news for military homeowners in Florida! If you receive a housing allowance that isn’t taxable, you can still deduct your mortgage interest without reducing your deduction by your nontaxable allowance.

In addition, if you received a qualified Mortgage Credit Certificate (MCC) from your state or local government when you obtained your mortgage, you may be eligible for the mortgage interest credit and we suggest consulting a tax professional to help calculate your credit. If you do not have an MCC, you aren’t eligible for this deduction as you can’t get the certificate after you purchase a home.

Real Estate Taxes

State and local real estate taxes are deductible, regardless of whether they’re paid through an escrow account as part of your mortgage payment (this is how most Florida homeowners pay real estate taxes), or paid directly to the taxing authority.

If you purchased your new home in Florida in 2019, you can also deduct the real estate taxes you paid at closing. These will not be on the 1098 tax form received from your mortgage lender, so be sure to have a copy of your Settlement Statement (aka closing statement) handy.

The total deduction for state and local taxes, including real estate taxes, is limited to $10,000 (or $5,000 if married filing separately).

Military members receiving a housing allowance that isn’t taxable can also deduct real estate taxes without reducing your deduction by your nontaxable allowance.

Closing Costs and Points

If you purchased your home in 2019, you may be eligible for tax deductions related to your closing costs. Select costs that appear on your Settlement Statement (aka closing statement) are deductible, including:

  • Points, or loan origination fees, paid when obtaining your mortgage, including any points the seller may have paid for you. Generally, you can deduct the full amount of points if the home purchased in 2019 is your primary residence, the amount is shown on your Settlement Statement, and you meet the other requirements outlined on page 5 of the IRS 2019 Publication 530.
  • Prepaid mortgage interest that appears on your Settlement Statement.
  • Prepaid property taxes paid at closing (see previous Real Estate Taxes section for more info).

Closing paperworkHome Improvements for Medical Purposes

If you made home improvements in 2019 that were required for medical care, you may be able to partially deduct them on your taxes. For the 2019 tax year, you can deduct the part of your expenses that are more than 7.5% of your adjusted gross income (AGI).

If you meet the expense requirement, then equipment that does not increase the value of your home can be fully deducted, including ramps, modified doorways and stairways, railings and support bars, altered cabinets, outlets, fixtures, and warning systems. The expense of maintaining and operating medically required equipment installed in the home, such as electricity, can also be deducted.

Medical equipment that increases the value of your home is deductible, but only the difference between the expense and the increased value of your home. For example, construction costs for a swimming pool recommended by a doctor for hydrotherapy purposes may be eligible for partial deduction depending on the difference between the cost and increased home value, as well as how often it is used for medical needs.

Home Expenses You Cannot Deduct

Wondering about other costs of homeownership? For your reference, the following costs are NOT deductible on your 2019 federal income tax return:

  • Homeowner's insurance premiums
  • Fire insurance premiums
  • Principal payments made on your mortgage
  • Title insurance
  • Utilities
  • Homeowner's association dues and fees

Florida Homestead Exemption

A huge benefit available to Florida homeowners is the Florida Homestead Exemption. While this isn’t an income tax deduction, this is a good opportunity to remind homeowners who purchased your home in 2019 that you must file for your Homestead Exemption by March 1, 2020.

The Florida Homestead Exemption can decrease the taxable value of your primary residence by as much as $50,000. This means lower real estate taxes. There are also additional exemptions available for active duty military and veterans, homeowners aged 65 and older, surviving spouse of fallen heroes, and permanently disabled homeowners.

Visit Florida Revenue or your county property appraiser’s website for more information on the homestead exemption, and don't forget to file if your purchased your home in Floridan in 2019.

If You Sold a House in 2019

If you sold a previous residence in 2019 for more than you paid or the “basis,” that difference is considered a capital gain and must be reported on your taxes. However, if that home was your primary residence for at least two of the five years prior to selling it, you can exclude up to $250,000 of profit, or capital gains, for a single filer and up to $500,000 if filing jointly. For most Floridians, this means you won’t be taxed on the profit from a home sale!

Need help determining your basis so you know if you had a capital gain or loss? The basis includes factors such as your original purchase price, certain closing costs, and certain improvements made to the property while you owned it, as well as depreciation and causality losses. Consult with your tax professional or tax software for assistance.

In Closing

new homes in Davenport FL

With changes being made to income tax deductions every year, it’s important to make stay in the know. The standard deduction significantly increased last year to $12,200 for those filing as single or married filing separately, $24,400 if you’re married and filing jointly, and $18,350 for those filing as head of household. This means for some, it may be more beneficial to take the standard deduction versus itemizing deductions on your 2019 tax return. 

While we pride ourselves on being knowledgeable on all things home-related, we are not tax experts! We strongly recommend consulting with a tax advisor to fully understand current tax laws, tax benefits available to you as a homeowner, and comparing the value of itemizing your taxes or taking the standard deduction.

Ready to own your first home and reap the benefits of homeownership, or looking for your next home? That IS our area of expertise and we would be excited to sit down with you, discuss your needs, and help you find the Florida new home of your dreams. Learn more about us and connect with a Florida New Home Specialist by browsing the Highland Homes website or calling or texting us at 863-797-4999.


Tags: IRS tax return tax benefits tax deductions income tax Schedule A itemized deductions is it deductible tax benefits of homeownership MIP PMI Mortgage Insurance Mortgage Interest Real Estate Taxes Florida Homestead Exemption Closing Costs Settlement Statement