Home Buying 101: Tax Benefits for Florida Homeowners

Posted: January, 30, 2019 | Categories: General Info | Home Buying 101
By Highland Homes

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

Good news - There are an array of tax deductions available to Florida homeowners that can add up to big tax savings when you file your 2018 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 an itemized tax return:

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 secured by your main home (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 in order for the interest to be deductible.

There is also good news for military home buyers in Florida! If you receive a housing allowance that isn’t taxable, you can still deduct your home 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

New homes in Auburndale at Juliana VillageAnother portion of your housing payment that is deductible are state and local real estate taxes. These 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 2018, you can also deduct the real estate taxes you paid at closing. These will not be on the 1098 form received from your mortgage lender, so be sure to check your settlement (closing) statement.

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.

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 2018 that you must file for your Homestead Exemption by March 1, 2019.

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 2018.

Closing Costs

Closing paperworkIf you purchased your home in 2018, you may also be eligible for tax deductions related to your closing costs! Select costs that appear on your Settlement Statement (aka closing statements or HUD-1 form) are deductible, including:










  • Points, or loan origination fees, you paid when obtaining your mortgage, including any points the seller may have paid for you. Generally, you can deduct the full amount of points in the year paid if the home purchased in 2018 is your primary residence, the amount is shown on your Settlement Statement, and you meet the other requirements outlined on page 5 and 6 of the IRS 2018 Publication 530.
  • Prepaid mortgage interest that appears on your Settlement Statement.
  • Prepaid property taxes you paid at closing (see previous Real Estate Taxes section for more info).


Home Improvements for Medical Purposes

If you made home improvements that were required for medical care in 2018, you may be able t deduct some of them on your taxes. For the 2018 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.

Any medical equipment that increases the value of your home is deductible, but only the difference between the expense and the increase in value of your home. For example, construction costs for a swimming pool recommend 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 it is used on a regular basis.

If You Sold a House in 2018

If you sold a previous residence in 2018 for more than you paid or the “basis,? that difference is considered a capital gain. You must report capital gains 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 paid when you purchased the home, 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 calculating this.

Mortgage Interest Premium (MIP or PMI)

Perhaps the biggest change for homeowners filing 2018 taxes is the itemized deduction for mortgage insurance premiums is no longer available as it expired at the end of 2017. So far, Congress has not passed a tax extender reinstating this deduction. What can you do to fight for this deduction which offers tax savings to many Florida homeowners? Contact your Congressional representatives and let them know it is important to your family!

In Closing

new homes in Davenport FLWith the Tax Cuts and Jobs Act of 2017 in effect for the 2018 tax year, it’s more important than ever to make sure you’re familiar with the tax deductions available to you as a homeowner. The standard deduction has significantly increased, to $12,000 for those filing as single or married filing separately, $24,000 if you’re married and filing jointly, and $18,000 for those filing as head of household.

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, 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 honored and 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 visiting the Highland Homes website or calling or texting us at 863-797-4999.

Tags: Florida home homebuying tips closing costs real estate homeowners home buying 1040 deducting closing costs deducting home improvements deducting mortgage interest deducting PMI deducting real estate taxes Florida homeowner Home Buying 101 homebuying 101 homeowner tips homeownership homestead exemption income tax return schedule A mortgage Florida FL closing