Tax Benefits for Colorado Homeowners
With the Rocky Mountains, phenomenal ski slopes, and endless hiking trails—it’s no wonder so many of us call Colorado “home.” However, there are more benefits to The Centennial State than stunning landscapes and friendly locals.
There are a handful of tax benefits for homeowners in Colorado, and the Janice Burtis Team has put together a list of the top deductions you should consider during tax season. So, let’s dive in.
ITEMIZED VS STANDARD DEDUCTIONS
Let's start by decoding the difference between standard and itemized deductions—two key players in lowering your income tax burden.
Normally, the IRS offers the standard deduction to all tax filers. Here’s what the breakdown looks like for 2023:
For single and married individuals filing taxes separately, the standard deduction is $13,850.
For married couples filing jointly, the standard deduction is $27,700.
For heads of households, the standard deduction is $20,800.
With the standard deduction, you can reduce your taxable income by a standard amount. However, here's where homeowners can cash in. If you choose to itemize deductions—including those tailored for homeowners—you can pass on the standard deduction and tally up your individual deductions instead.
Just make sure that the sum of your itemized deductions is larger than the standard deduction.
LIST OF HOMEOWNER’S ITEMIZED DEDUCTIONS
Okay, now that we’ve talked through the nitty-gritty, here are some itemized tax deductions that homeowners can claim:
Mortgage Interest
When it comes to paying interest on your mortgage, homeowners can deduct 100% of their payment for both a primary and secondary home. Although, there are some limitations. For loans established after 2017, there is a deduction limit of $750,000—for loans established before, there is a limit of $1 million.
Luckily, homeowners will receive a Mortgage Interest Statement Form 1098 from their lender that outlines the total annual home mortgage interest paid, making it much simpler to itemize this tax deduction.
Mortgage Insurance
Many people who purchase a home without putting 20% down are required to buy mortgage insurance as well. Luckily, your PMI premiums can be deducted from taxable income.
Real Estate Taxes
Known as the SALT deduction (State and Local Taxes), homeowners are able to deduct up to $10,000 in state and local taxes if filing jointly ($5,000 for single or separate). This includes property taxes and your choice of income or sales taxes.
Pro Tip: Colorado has one of the lowest property taxes in the United States, with an average of just 0.55 percent.
Capital Gains Exclusion
Did you know that those who sell their Colorado home don’t have to pay capital gains tax on their profit from the sale? With today’s current laws, people who have lived in their property for at least two years do not have to pay any taxes on the first $500,000 of their home sale profit. (This is for joint filers; the amount is halved for single or separate).
Home Equity Loans
This is a type of loan where homeowners can borrow from the equity of their own home. The loan amount is determined by the property value and must be used to buy, build, or make improvements to a home. These loans would make a great addition to your itemized list of tax deductions.
Tax season may not be your favorite time of year, but it can be a breeze when working with the right professional. If you’re in need of a CPA or financial planner, The Janice Burtis Team would be happy to provide a recommendation. Because when it comes to Grand Junction real estate, our team will continue to care for you long after the deal is done!
