Yay, tax season is almost here…said no one – ever.
Tax season can sneak up on anyone. Whether you’re a first-time homebuyer or seasoned homeowner, you may feel unprepared and stressed out. Not realizing the deductions your home provides can leave money on the table when it should be in your pocket. Take full advantage of all your available homeowner tax breaks when filing this year.
That big repair bill you paid in March? You may be able to deduct it. Repairs and home improvements may be able to be deducted off your taxes. But you can’t do it unless you track them. Think back to the beginning of the year and note any home improvements you invested in. Dig up the receipts and take them to your CPA when you file. Even if you can’t take the deduction the year you made the improvements, you may be able to use them the year you sell your house.
Another one of the best tax tips this season is…
Paying property taxes doesn’t have to hurt. Property taxes can be expensive and a real budget buster that you have to fork over every year. The only good news about it is that you might be able to use them to shave your tax bill down a bit. According to the IRS, homeowners can take a deduction of up to $10,000 on state and local income, sales, real estate, and property taxes.
Take a mortgage interest deduction. Depending on your interest rate and loan term, you may be paying several hundreds of dollars every month in interest as part of your mortgage payment. If you itemize your expenses, some of this is deductible. In 2019, interest on $750,000 or less of mortgage debt can be deducted from your taxes. Remember, however, that if you take a mortgage interest deduction you don’t get to take the standard deduction afforded by the IRS.
Want to see how this shakes out in black and white? Use this mortgage interest tax deduction calculator to see your results.
Track home office expenses. Working from home is more common than ever before, and the trend is growing. If you’re self-employed or your job requires you to work from home, you might be able to save a considerable amount on your tax bill.
The space you’re calling your office needs to be used primarily as an office to be deductible. The way you figure the deduction can vary. Some people use the actual expense method, which entails deducting the expenses associated with the office like electricity, mortgage payment, and home repairs. Others decide the simplified version is the better option. The homeowner gets a deduction of $5 for every square foot of office space in the home. This is for offices under 300-square-feet.
Choose energy-efficient updates. In an effort to get consumers to choose household items that take less energy, there are tax deductions for energy-efficient updates. These can add up to big savings at tax time, not to mention they help save our planet. For example, the Residential Renewable Energy Tax Credit is 30% of the cost of the installation on or in a home. This includes solar hot water heaters and solar energy systems, among others.
Keep in mind that the tax credit availability changes from year to year, so talk to your CPA about which ones you qualify to use.
When in doubt…file it away. Don’t forgo a tax savings because you’re unorganized. The last thing you want to deal with is needing a receipt or documentation to qualify for a tax credit or deduction and not be able to find it. Keep everything that may relate to your taxes in a safe, central location. Either designate a file, buy a lockbox, or dedicate a drawer for all tax material.
Related Read: How Your Tax Refund Can Save You Money on Your Mortgage
Every homeowner needs to sift through the past year and search for expenses and upgrades that may be tax-deductible. Seemingly small items can add up to hundreds of tax dollars that you can keep from paying. Make a resolution to keep your expenses, receipts, and documents filed in a central location to make next year’s taxes easier to complete. You’ll be glad you did.