Tax Tips for Homeowners

Laura Insley's picture
Tax Tips for Homeowners
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It’s that time of year again! TAX TIME. Who’s ready to start filling out some tax returns? As a homeowner, filing returns can become a little tricky. Not only can it get costly, but all of the tax rules and regulations can get pretty confusing. To help you navigate the process, our real estate experts, Lorraine Thielen and Linda Hahn, have put together a list of home-related deductions to consider when preparing your returns. 

Pro tip: The earlier you get started, the better off you will be. More often than not, procrastination will make you miss out on potential tax benefits you deserve. If you give yourself plenty of time by beginning the process early, you could end up with much more money in your pocket! 

State and Local Property Taxes

State and local property taxes may be deducted as long as you are not subject to the alternative minimum tax (AMT). The AMT applies primarily to those with higher incomes, and is calculated separately from your normal income taxes using different rates. Depending on the outcome of the calculations, you would be required to pay the greater of the two amounts. In addition, under the AMT, certain deductions and exemptions may no longer be available to you. At its inception, the AMT was designed to prevent the rich from abusing tax law. Unfortunately, since the AMT was not initially indexed for inflation, middle income taxpayers began feeling the threat of the higher tax bracket. In 2013, however, President Obama signed the American Taxpayer Relief Act of 2012, correcting the issue, and now the AMT is adjusted annually. Ask an expert how AMT might affect you. 

Home Mortgage Interest

This deduction allows homeowners to reduce taxable income by the interest paid on their home loan during the year. You can write off up to one million dollars as long as the property is your primary or secondary residence. The United States is one of only three countries that allow you to deduct all of your mortgage interest, so take advantage of this benefit!

Home Equity Loan Interest

Home equity loans differ from home mortgage loans in that they act as a line of credit. That said, they do offer the same tax benefits. You can also deduct the interest paid for the year on your home equity loan as long as you are not subject to the AMT.

Sales Tax for Materials on a Major Home Renovation

Get the itch for a little home makeover last year? You may be able to get some of that money back! If you paid sales tax on any materials you purchased for major construction on your home, you might be able to write the sales taxes off. Check with your accountant or a tax expert to make sure this is true under your state law.

New Homeowner Deductions

If you purchased a home during this tax year, you may be able to take advantage of other write-offs. These can include: loan origination fees, prorated interest on a new loan or prorated property taxes. It is important to remember that you can only claim these deductions as long as you’re not subject to AMT.

Tax time can be very stressful and financially draining. With all of the added responsibilities and costs that come with owning a home, it is important for homeowners to hold onto as much of their money as possible. The above deductions only represent those related to home ownership; don’t forget: child care, college expenses, student loan interest, medical expenses, charity, and self-employment! The key is to start gathering your information now. Tax rules change often, so you may qualify for other deductions. By doing some additional research or speaking with a professional, you might just come out ahead this year!

Linda Hahn and Lorraine ThelenAbout Our Experts

Lorraine Thielen & Linda Hahn bring over 25 years of experience to help you buy or sell your home and make informed decisions in today's market. As realtors for RE/MAX TerraSol and specializing in the Orange County market, Thielen and Hahn offer a wealth of real estate knowledge to take the stress out of homebuying/selling. Visit their website for more information and to view current listings. 

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