Homeowner Tax Tips And Mistakes
With the tax filing deadline fast approaching, homeowners might be scrambling to find as many deductions as possible. The great thing about home ownership is it allows for many write-offs, lessening the burden of the dreaded date arriving each year on April 15th. No matter what income bracket you might be in, taxes, particularly preparing a return, isn't fun, and it's why you wait until that latest possible moment to fill out those cumbersome, confusing forms.
About 74,000 pages in length, the U.S. Tax Code is one big book of rules, regulations, and of course, tables. It should come as no surprise that with such volume, it's difficult to know what is and what isn't allowable. One thing that most homeowners do know and rely on, is the mortgage interest tax deduction. This provides a way to lessen not only your tax obligation, but save money on the biggest investment in your lifetime.
However, there are more deductions and other ways to save on income tax. You probably are familiar with the most common of these write-offs, but since the income tax code changes so often, working out to an average of 1.8 percent in length each year over the past seven years, since 2008, there are likely to be things you don't know. You might well qualify for other deductions, and because the final filing date is so close, you ought to take advantage of as many as possible.
Biggest Homeowner Tax Mistakes
There are several homeowners who become confused when preparing their taxes, particularly in states with an income tax. Here in Sarasota, we enjoy relatively low property taxes, which can be reduced further by claiming homestead exemption. What's more, since the state of Florida doesn't have an income tax, that's even more savings. One of the most popular deductions is for those property taxes, which on the federal level, you count said taxes for the year you paid them, not for the year prior.
If you're among the new property owners, congratulations. You've just taken another step up the American-dream ladder and are a homeowner. Along with the joy of painting, plumbing and yard work, you now have some new tax considerations. The good news is you can deduct many home-related expenses. These tax breaks are available. --Bankrate
That's just one mistake that homeowners can make on their income tax returns. Another is confusing refinancing with a original mortgage note. When you refinanced, you might have paid points, and those points are deductible, but not all at once. You divide the total amount of points paid over the life of the refinance. So, if you paid $3,000 in refinancing points for a new, fixed, 15-year loan, you would divide three-thousand by fifteen, making your yearly write-off $200. Another popular deduction is for the home office. Be sure to be precise with your calculations because this is one area that's flagged by the feds.
Homeowner Tax Tips for Last Minute Filers
Claiming deductions is something everyone wants to do and there are some ways to use the code to your advantage. You're likely to write-off your mortgage interest and roll-in your property taxes, but you can also do the following:
- Take a home energy efficiency tax credit. If you install solar panels, a geothermal heating system, or make other energy-wise upgrades to your property, you can claim a credit for 30 percent of the cost. In addition, you might also be able to snag an incentive from the state. Regardless of these, it's a good idea to make energy efficient improvements to lower your utility costs month after month.
- Claim mortgage interest deductions. Not only can you deduct the mortgage interest for your primary residence, you can also do so for another home, like a second home or vacation property. The deduction is also available for second mortgages, as well as home equity loans.
- Deduct your selling expenses. If you sold a home last year, the expenses associated with that sale can be claimed on your taxes this year. These costs include real estate sales commission, home staging costs, closing costs, and any other expenses related to the marketing and sale of your old home.
- Write-off moving expenses. If you relocated last year for your job and moved more than 50 miles away from your former residence, you can also deduct those moving expenses. This is an easy write-off to calculate and can be done simply by following this IRS Q&A.
- Take the home office deduction. Though this isn't going to amount to a bunch of savings, it's still worthwhile to take. You are allowed to deducted expenses for a dedicated home office, but it must be just that. You have two options: "Simplified" and "Regular". The difference is really in the amount of math, the simplified option is just multiplying the square footage by $5, and is limited to a total of $1,500. If you take the regular option, you can write-off a percentage of utilities and mortgage interest.
Whatever you deduct, take the time to check your arithmetic and have an experienced professional look your return over.