From incentives to deductions, taxes are complicated and can be confusing even for the seasoned property owner. Understanding the ins and outs of some common property tax concerns can help save you money and put your mind at ease. Here are three common tax topics.
1. Natural Disaster Relief
If your home is affected by a natural disaster, your damage costs will be deductible from both state and federal income taxes. Disasters include fires, floods, earthquakes, hurricanes and more. Homeowners can deduct their losses by filing an amended return for the tax year before the event happened. This helps to minimize the wait for refund money that can be used to make repairs or pay for living expenses.
2. Historic Rehabilitation
If your home is a certified historic home, then you may be able to receive a break in your taxes. Many states offer tax incentives, reductions and abatement programs for owners of residential historic homes. These programs are described on the National Trust’s website, which also offers resources and tips for owners of historic homes. Visit the site at www.preservationnation.org.
3. Home Improvement Deductions
Many sellers ask if they can deduct the cost of improvements made to their homes from their taxes; the answer is not black and white. Yes, you can deduct improvements, but only after the home has been sold. This is because improvements add to the basis of your home. Because your basis is subtracted from your selling price to figure out what your home sale gain is, these tax deductions can only be made after your home is sold and your basis is defined.
It is also important to note that the IRS has specific qualifications for what counts as a taxable “improvement.” These are renovations that add to your home’s value and extend its “useful life.” Taxable improvement examples include an extra bathroom or updated plumbing, heating or electrical systems.
For more information on property taxes, please contact RE/MAX of Boulder, Inc. at 303-449-7000, or 1-800-825-7000.
RE/MAX of Boulder, Inc. located on the corner of Canyon and Folsom, is nationally and locally recognized as one of the most successful real estate offices in the industry. Nationally, they are one of the "Top 500 Power Brokers in the United States" as listed in National Real Estate & Relocation magazine. Real Trends ranked them #1 in the Nation for Closed Sales Volume for 2010. Regionally, for the 4th year in a row, the company has been named the #1 RE/MAX office in America for Single Office Closed Volume. They can be reached at 303.449.7000 or visit http://www.BoulderCO.com. Connect with them on Facebook and Twitter, search remaxofboulder. Subscribe to their YouTube channel and see videos of all their homes for sale at http://youtube.com/remaxofboulder