How To Prepare For Tax Season As A First-Time Homeowner In South Carolina

For many in South Carolina, buying a home symbolizes a fresh start—marking the beginning of stability and genuine adulthood. However, homeownership also brings specific tax implications that can significantly impact your finances. This article covers:

• The tax benefits available to first-time homeowners in South Carolina.
• How owning a home affects your federal and state tax returns.
• How to claim home improvement deductions, credits, and the homestead exemption.

What Tax Benefits Are Available For First-Time Homeowners In South Carolina?

Owning a home comes with many tax advantages, but for first-time homeowners in South Carolina, one of the most significant benefits is the Mortgage Credit Certificate (MCC) program.

The MCC allows first-time buyers to receive a direct credit on their federal taxes, effectively reducing the cost of homeownership. To apply, request the necessary forms from your mortgage company, which typically provides everything you need.

The amount of the credit depends on your mortgage size and other factors in your tax return, but it can be substantial, offering a valuable incentive for new homeowners.

How Does Owning A Home Impact My Federal Tax Return?

Owning a home can provide significant tax benefits, but they largely depend on whether you itemize deductions. Since the IRS increased the standard deduction, fewer people itemize their returns. However, if you do itemize, you can deduct:

• Mortgage Interest: The interest paid on your mortgage can be a significant deduction.
• Property Taxes: These are also deductible, though there are limits based on current tax laws.

If you’re a small business owner working from home, you may also qualify for the home office deduction. This can be valuable, but it’s a complex deduction that requires precise record-keeping. Hiring a professional is recommended to avoid errors that could trigger an audit.

Can I Deduct Mortgage Interest On My South Carolina Taxes?

Yes, you can deduct mortgage interest on your South Carolina tax return. South Carolina’s tax system is closely tied to the federal return, so any mortgage interest deduction claimed on your federal return typically carries over to your state return as well.

How Do I Claim Tax Deductions For Home Improvements And Repairs?

Unfortunately, there are limited deductions for home improvement or repair expenses, but there are a few scenarios where you can benefit:

1. Home Office Deduction
   If you’re a small business owner using part of your home as an office, you can claim the home office deduction. This requires careful documentation to ensure compliance with IRS rules.
2. Medical-Related Improvements
   If you are disabled or have medical needs, improvements made for accessibility or medical purposes may qualify as deductible expenses.
3. Credits For Energy Efficiency
   Some home improvements qualify for credits, which are often more valuable than deductions. For example:
   • Energy-Efficient Appliances: Buying qualifying appliances may earn you a tax credit.
   • Renewable Energy Credits: Installing solar panels or other renewable energy systems might also qualify you for credits.

It’s essential to keep detailed records of every major improvement you make to your home. Use a system like a database, notebook, or QuickBooks to document these expenses.

Why is this important? When you sell your home, these improvements increase the home’s value, known as its basis. A higher basis reduces the taxable profit from the sale, which can significantly lower your tax liability.

By tracking and including these improvements, you ensure you take full advantage of the tax benefits, helping you save money in the long run.

How Does The Homestead Exemption Work For First-Time Homeowners?

The Homestead Exemption isn’t limited to first-time homeowners—it’s available to all homeowners who qualify. For those who meet the requirements, the exemption removes the first $50,000 of fair market value from property taxes on your primary residence.

To qualify, you must meet at least one of the following criteria:

• Be 65 or older.
• Be totally and permanently disabled.
• Be legally blind.

If you meet any of these conditions, you can apply for the exemption. Once it’s approved, there’s no need to reapply each year.

Have More Questions About Homeownership And Taxes?

For more information on How To Prepare For Tax Season In South Carolina, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (864) 271-7940 today.