Did you feel robbed after last year’s tax season? Do you feel like owning a home should have saved you more money? You are correct. With tax season right around the corner, it’s time to start considering different ways to work the system this time around. Unfortunately, reaping the full benefits of homeowner’s tax breaks can be a fairly complicated process. Luckily, there are 5 quick tips to considering while simply saving on homeowners taxes this year.
1) Escrow funds ARE NOT actual paid taxes
If your lender has given you a deed, bond or document to pay your property taxes, it is important to not only deduct the amount in escrowed funds, but you should list the adjusted amount of your lender as well. Though you may regularly pay into your escrow account, the amount to properly cover property taxes is either less or more than your true property tax bill.
2) DO NOT forget to repay the first-time homebuyer tax credit
If your home was included in the homebuyer tax credit of 2008, you are required to repay 1/8th of the remaining credit over a span of 15 years. Homeowners who were in the 2009 and 2010 tax credit periods and then sold their house or no longer use the home are required to pay back remaining credit within 36 months of the sale.
3) DON’T forget all mortgage interests
Perhaps the most significant tax break you can receive is in the reflection of your monthly house payments. Because the majority of your monthly payments go towards interest already, it is all deductible from taxes. If you own more than one home, be sure to visit every property for at least 14 days to avoid having the IRS consider the establishments as a residential rental property, you will get a fraction of the tax deduction.
4) INCLUDE the interest on a home improvement loan
If you have taken out a loan for home improvement that is accruing interest, you are eligible for more tax deductions. Home improvements, as well as repairs and replacements, can be added as a “capital improvement” to taxes and can qualify for tax cuts because it has increased the value of your home.
5) DO include information on a sold home
If you’ve recently sold your home, the selling costs can help reduce your taxable capital gain. What is a “selling cost”? Any amount paid for real estate broker’s commissions, title insurance, legal fees, advertising costs, administrative costs, escrow fees and inspection fees all contribute to the final sale price of your home.
Having homeowners insurance can also benefit when saving money this season. After considering the above steps, talk with a homeowners insurance associate about further ways you can save money on this year’s tax deduction.