Tax season is upon us but, before filing those returns, make sure that they include any and all benefits available for home owners.
Bradley K. Tuttle’s Real Estate Update offers these tips for maximizing deductions as they relate to owning a home, so gather all paperwork pertaining to your home and get ready to find deductible expenses. For those who didn’t keep good records last year, now is the time to start: it'll pay off in 2015 when tax time returns.
- The biggest savings comes in the form of the mortgage-interest deduction; especially in the early years of a loan, it can save the most money. Home owners can claim it on both and secondary homes, granted that a home is valued at less than $1 million and the tax return is itemized.
- Property taxes are deductible for as long as the home is owned and can be included as an itemized expense on the Federal tax return.
- Improving a home, such as adding a room, installing a new roof or general improvements to increase the home’s value, can reduce tax liability. Find all paid invoices pertaining to remodeling or improvement projects to include on your tax return.
- Home owners who have installed energy-efficiency appliances or upgrades can offset their tax bill to the IRS, dollar-for-dollar for up to 10 percent of the amount that they spent on specific home energy-efficiency upgrades, such as energy-efficient water heaters or insulation. The cap on this deduction is a mere $500, though sometimes it’s less, and it may disappear after this round of income tax returns is complete.
As more people work from home, the home business office is not only convenient but also a tax write-off. A new 2013 tax deduction allows homeowners who have a business office in their house to claim $5 per square foot for up to 300 square feet (a simpler formula than previous tax years). So an 8-foot-by-10-foot home office can save the homeowner $400.
To make sure you’re taking advantage of all home ownership tax breaks, compile all of the home’s documents and receipts from the previous year and take them to your tax accountant. If you’re not sure what qualifies, your accountant will.
Also, the IRS’s Publication 17 is a 292-page guide contains thousands of interactive links to help taxpayers quickly get answers to their questions regarding their 2013 tax returns. Other publications which may help include: No. 1, “Your Rights as a Taxpayer;” No. 502, “Medical and Dental Expenses;” No. 504, “Divorced or Separated Individuals;” No. 523, “Selling Your Home;” and No. 530, “Tax Information for First Time Homebuyers.”
A complete list can be found at www.irs.gov, click on Forms and Publications.
Internal Revenue Service regulations generally provide that, for the purpose of avoiding federal tax penalties, a taxpayer may rely only on formal written advice meeting specific requirements. Any tax advice in this article does not meet those requirements. Accordingly, any such tax advice was not intended or written to be used, and it cannot be used, for the purpose of avoiding federal tax penalties that may be imposed on you or for the purpose of promoting, marketing, or recommending to another party any tax-related matters. You should seek advice directly from a qualified tax professional before making any decision or taking any action on accounting, tax, financial and consulting related matters and issues.
Owner and Founder
RE/MAX of Boulder