One of the big benefits of owning your own home are the additional tax benefits that can be claimed compared to renters. If you have recently bought a home, or are looking to buy one this year, there are some key things to keep in mind when it comes to completing and filing your taxes as a home owner. This is especially important to take note of if you are a first-time home buyer.
If you have completed any home improvement projects, be sure to track your expenses. There are several types of home improvements that qualify for tax deductions. In particular, energy efficient updates such as new windows, or Energy Star appliances can pay you back with a tax deduction. If you have just bought your home and get work done within the same tax year, you may qualify for a home sale exemption which can lower the taxable amount of the sale price you paid. Be sure to keep all receipts, contracts and records of any upgrades you have done.
The home office is more common now than it has ever been. As a homeowner if you have a home office there is a deduction than can be applied to your taxes. But be aware that the process of determining the home office deduction is complex and mistakes can be made. There is a new simplified home office deduction now that is easier to apply, though you may have less of a deduction. If you opt to go the standard route, having a tax advisor review your deductions is the safest way to be sure it is done correctly.
If you have an escrow account, part of these funds are tax deductible. A common mistake made in filing this type of deduction is to include the entire amount of an escrow account. In truth only a portion of these funds are used to pay taxes. To be sure you have the right amount listed, look for the amount of taxes paid on your annual escrow statement, or contact your escrow account representative to confirm the correct figures.
If you are a new home owner, chances are you haven’t done much itemizing on your taxes. As a renter this is not as crucial. As a homeowner however, when you itemize you can get the full benefit of applicable tax deductions. This means filing the long form instead of the 1040EZ form. As with home improvements, be sure to keep statements and receipts as they are related to your home, work you have done on your home or if you work from home, any costs you bear in the line of your job.
To get the most out of homeowner tax deductions the best thing to do is to work with a trusted tax advisor. These are the professionals who are up on what’s most current and understand the rules and regulations in depth.
When you are ready to buy or sell a home, we at Haylen Group are here to help you with all of your real estate needs! If you are unsure what your options are, call Helen Chong at (408) 800-LIST or email at Helen@HaylenGroup.com. You can also visit us at our website for available listings and additional information.