Tax Tips for Homeowners
This time of year homeowners are gearing up for spring break vacations, prepping their garden beds, scheduling summer activities, and….
Yes, that’s right. The deadline to submit your taxes ist just a month away. Are you the procrastinator type who still needs to file? If you’re nervous about how your new home ownership will affect your taxes, don’t be! Being a homeowner is a real benefit when it comes to tax season because it gives you access to special federal income tax breaks. To help you maximize your tax return, keep these tips in mind:
One way to ensure a smoother tax filing process is to make sure you’re organized. Save any tax-related receipts (ie. home improvement repairs, installing energy efficient updates, etc), keep your previous years’ tax return documentations, and store all of your new tax forms together in a folder for easy referencing purposes. It is suggested to hang on to your prior years’ tax documentations for anywhere between three and six years (as the IRS can go back that far to audit you should they be flagged about something suspicious). Some people file away a hard copy while saving a backup copy on a drive.
If you are confident that you have more than a certain amount in deductions ($12,200 for singles, and $24,400 for those married filing jointly), you will want to consider itemizing your deductions. In years past, the standard deduction hasn’t been so high, forcing many people to try itemizing everything year after year. However, with this recent change to the standard deduction, many people may find it more beneficial to use a standardized deduction.
Itemizing takes a longer to prepare, but like we mentioned earlier, if you’re certain you’ve met the deduction threshold, itemizing will help lessen your tax obligation to the federal government.
Should you choose to itemize, be certain you have proof (medical receipts, charitable donations stubs, home office expenses, etc) for everything you will be deducting.
Be Aware of Deductions & Tax Credits
Home ownership allows you to take deductions for home mortgage interest, state and local property taxes, medical expenses, charitable contributions, retirement plan contributions, personal property taxes (taxes you have paid on loans for your RV, boat, or other toys), and home office expenses. These deductions can help lower your tax bill.
In addition, you can receive a tax credit for improving your home’s energy efficiency (ie. installing solar panels). Tax credits are different from deductions in that they directly reduce the amount of tax you owe dollar-for-dollar on your tax liability. Tax deductions lessen the amount your income is subject to taxes.
Other non-home tax credits you may also be able to include on your tax return are:
- Child Tax Credit
- Lifetime Learning Tax Credit
- Child and Dependant Care Tax Credit
- American Opportunity Tax Credit
- Earned Income Tax Credit
Visit the IRS website to find more credits and deductions.
Sellers Get Breaks, Too
Recently sold your home? Don’t worry, you can write off a few expenses from your sale on your taxes as well. Write offs can include such things as advertising, purchasing title insurance, repair work on your home during a certain time period, etc.
In the past those who have relocated due to a new job could also write off moving expenses. However, new tax rules don’t allow those write-offs anymore, unless you’re in the military.
You Can Get Tax Breaks for A Second Home, Too!
If you’re considering purchasing a second home, great news! All of the tax breaks that apply to your first home apply to your second home, too (meaning you can write off your second home’s mortgage interest, too). The only catch? You can’t make money off the second home by renting it out (at least not for more than 14 days a year).
If you’re considering purchasing a second home, let Northern Title help you with your title and escrow work. We help the process go smoothly so you can feel comfortable, confident, and at ease moving forward. Contact one of our offices today to help you get going.
Consider Hiring a Professional
It can be difficult to stay up to speed on what the latest rules are for the current year’s taxes. If you find yourself overwhelmed preparing your own taxes, seek help from a tax professional. These professionals understand the current rules, can reduce your likelihood for getting audited, and can help you maximize your return. Find one who has a CPA license and get recommendations from your friends. A certified preparer can greatly reduce the amount of work and stress you feel, and help you feel confident in knowing you are getting the most of your return.