Tax Benefits of Home Ownership and more

Tax Benefits of Home Ownership and more.  Early-Group

When it comes to owning a home, there are several benefits that tax payers may take advantage of when filing their itemized return. Here are just a few to consider when preparing your taxes:

  • When purchasing a home, some closing costs may be deductible. Discount points and origination fees are tax deductible to the buyer. If these apply to your mortgage.
  • If you took out a loan to purchase your home, the mortgage interest is typically deductible in the year in which it was paid. This adds up quickly in most federal tax brackets. Your deduction may be limited if certain circumstances apply in higher tax brackets, or if you took out a mortgage for reasons other than to buy, build or improve your home.
  • Real estate property taxes also provide a tax benefit. In the year you purchase the home, you are entitled to deduct the real estate taxes paid on your settlement statement either to an escrow account or directly to the taxing authority. You may continue to deduct property taxes annually during your home ownership.
  • Mortgage Insurance Premiums (MIP) or Private Mortgage Insurance (PMI) may also be deductible when your down-payment is less than 20 percent. Several changes took effect on June 3, 2013 regarding cancellation and increases to the annual MIP, so it is best to consult your accountant or tax preparer to ensure you accurately claim any deductions
  • Do you work from home? If you have a home office that you use only for business, you may have a deduction for a portion of some items such as mortgage, insurance, utilities or other expenses relative to the office space. There are many considerations when deducting home office expenses, and it may or may not be a benefit to you based on your occupation and overall business use.
  • When selling your home, there are potential tax deductions as well as possible implications to consider. Some closing costs may be deductible including and not limited to real estate commissions, title insurance, legal fees, and surveys. Capital gains or losses may apply, and your tax expert can advise you on determining your basis and adjustments.

Some online resources that may be helpful regarding other home ownerships tax benefits include the Internal Revenue Service or National Association of Realtor (NAR).

A recent item to note regarding married tax filings… A new federal ruling now recognizes married same-sex couples just as their heterosexual counterparts for federal tax purposes regardless where they ultimately live. The Supreme Court ruled that married same-sex couples will be treated as married for federal tax purposes, including income as well as gift and estate taxes, but this ruling does not apply to registered domestic partnerships/civil unions. This covers couples who marry in one state and move to another that may not recognize their union. As a result, lawfully married same-sex couples no longer have to declare themselves unmarried on federal income tax returns, and spouses will not have to pay tax on health insurance benefits received through a spouse – an average savings of $1,000 tax per year for same-sex couples. Changes could be especially significant on estate taxes, where spouses benefit from tax advantages. For more information, the Wall Street Journal published a review.

Disclaimer: The links to articles and resources here are only to be used for informational purposes. Tax payers should always seek professional advice on financial and legal matters from a tax preparer, accountant, attorney or other legal counsel.

Four Places To Look For Tax Deductions In Your Home

Paying your income taxes each year leave your wallet a bit thin?  There may be money hiding in your home that lessens your tax burden. Here are four places to look:

1. Home-Office Deduction

If you work from home, you could qualify for a home-office deduction. Taking the deduction can be a bit complicated, so many people who qualify don’t claim the exemption.  An estimated 26 million Americans have home offices, but only 3.4 million claim them on their tax return.

Perhaps that’s why the IRS attempted to simplify the process in 2013.  The write-off takes into account depreciation, utilities, insurance, the amount of square footage dedicated for office space, whether you host clients at your house and other factors.

Because parameters involved in filing a home-office exemption are complicated, keep all business-related receipts, records of client meetings and related data to make it easier to prepare your return.

2. Casualty Loss

Damage to your home from an act of God, theft or burglary may qualify you for a tax deduction.  To qualify, the causalty loss must meet the “sudden event test” that means it must be sudden, unpredictable, have involved some natural force and occur in a single instance.  To claim thefts and burglaries, you must be able to prove that a wrong doing has actually occurred. It can’t just be a case of a lost item that you suspect was stolen.  Proof can come in the form of witness statements, police reports or newspaper accounts.

3. Energy Efficiency Upgrades And Repairs

Upgrading your home with energy efficient improvements may qualify for a tax deduction.  New roofs, insulation, windows, doors and a number of additional items can apply.  The deductions let homeowners claim 10% of the total bill for energy efficient materials, maximum credit is $500.

4. Real Estate Taxes And Newly Purchased Homes

New home owners should look at their settlement statement a bit closer.  If the previous owner prepaid property taxes that cover any of the time you owned the home, you can include the prepaid taxes in your property tax deduction.

Don’t pay more than you have to when you file your taxes. Consider these commonly overlooked deductions that can lessen the amount you have to pay or increase your refund.



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