Tax season can make most of us cringe. But, if you're a homeowner, make certain you meet with experts to see how you may benefit at tax time by owning a home.
Minimizing your tax liability is always the goal. Start first by getting all your paperwork together. Hopefully you've kept good, clean records of everything pertaining to your home. Remodeling projects can often be deducted, so go through your files and search for the paid invoices. However, repairs to restore items to their original state usually aren't tax deductible.
If you haven't kept good records, now is the time to start. It'll pay off in 2015 when it comes time to do your taxes. Here are a few tips to get you ready for tax season this year and beyond.
The largest savings is the mortgage interest deduction. Homeowners love this one because, especially in the early years of a loan, it can save tons of money. The deduction can be claimed on both primary and secondary homes. Two requirements: your home is less than a million dollars and you itemize your tax return.
Find your property tax statement for the end of the year. Your property taxes paid are deductible for as long as you own the home. This is another tax savings that you'll be able to record on your Federal form. Property taxes are taken as an itemized expense.
Improving your home can also be a tax write-off. Maybe you added a room addition, installed a new roof, or made general improvements to increase the value of your home, all of these things can help to reduce your tax liability and they can also increase the value of your home when it comes time to sell.
If you've installed energy-efficiency appliances or upgrades, you can offset your tax bill to the IRS, dollar-for-dollar for up to 10 percent of the amount that you spent on specific home energy-efficiency upgrades. That means items such as energy-efficient water heaters or insulation can help you at tax time. However, the cap on this deduction is a mere $500 (there are cases when it's less. Check with your tax accountant for details).
With so many people working 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 an office in their house to claim $5 per square foot for up to 300 square feet (a simpler formula than previous tax years). So a room that's 8x10 can save you $400.
Keep in mind that tax deductions are always on the government's chopping block and some, like the energy tax credit, are gone after the 2013 tax year and not expected to return for future tax years.
There are many fees and expenses associated with owning a home. Don't try to guess which things will help lower your tax bill. Instead, compile all of your home's documents and receipts from the previous year and bring them into your tax accountant for advice. Often there are areas where you can save a little more, but you won't know until you try.
Recently, the IRS announced that it has significantly updated "Your Federal Income Tax" forms. According to the IRS, Publication 17 includes important changes to help taxpayers "get the most out of various tax benefits and get a jump on preparing their 2013 federal income tax returns." This 292-page guide contains thousands of interactive links to help taxpayers quickly get answers to their questions.
Other publications which may assist you 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.