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Wednesday, 17 July 2019
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This Old House - Do-it-Yourself

Quick Tax Tips for Homeowners

Written by Posted On Saturday, 15 December 2018 11:25
Quick Tax Tips for Homeowners Photo by energepic.com from Pexels

If you have recently purchased a home—or intend to do so soon—you may be concerned about your next tax return.

After all, taxes are implicated in nearly every commercial, medical, and professional venture available to citizens. Even the lottery has ties to the U.S. tax system!

Homeownership does add another level of complexity to your filing. However, the secret to navigating taxes and homeownership easily lies in being informed. Knowing your tax obligations and eligible deductions can mean the difference between a high tax bill and a maximized refund.

Here are some quick tax tips.

Stay Organized

Proper documentation is vital for effective (and high-refund) tax filing, so establish a system now to keep your digits in order. For some homeowners, this means a physical filing system, replete with paper copies and file cabinets of tax documents.

For others, it may mean going fully digital, storing electronic copies of documents in the cloud (and on flash drives).

If you are self-employed, a subscription to QuickBooks can be vital; this program easily organizes business and personal expenses, provides suggestions for quarterly tax filing, and helps you anticipate deductions.

Be sure to keep prior years’ returns handy so that you can refer to these when filing. You will also want to have any documentation related to your home purchase in order. These include lending and purchase agreements, records of mortgage and interest payments, and the like.

Also, hold on to your home improvement receipts. You cannot deduct these expenses for the given tax year, but they can help lower your tax bill if you choose to sell your renovated home in the future.

Know Your Eligible Deductions

The Tax Cuts and Jobs Acts recently modified and even eliminated some tax benefits for homeowners. It’s normal for tax codes to change as administrations shift, but do be aware of these changes prior to filing.

For example, homeowners will likely be unable to deduct private mortgage insurance (PMI) in 2018, as this deduction was extended only through 2017 (and is pending review). The regulations governing home equity loan interest deduction have also changed, and there is now a $10,000 cap on itemized deduction for property tax.

You can learn more about the results of the TCJA by visiting the IRS website (www.irs.gov).

Don’t be alarmed, however. As a homeowner (existing or prospective), you are still entitled to several benefits, and it’s wise to know of your eligible deductions now.

You may not be able to deduct moving expenses accrued after December 31, 2017, under the TCJA, for example, but you are still able to deduct mortgage interest (within established limits). The same goes for home office expenses and mortgage points.

Improve Your Home’s Energy Efficiency

Yes, investing in alternative energy sources in your home can reduce your tax bill and make you eligible for yet another homeowner deduction. Consider boosting your home’s energy efficiency by installing solar panels, as doing so can mean a tax credit a third of the installation cost.

Introducing solar power in your home can also augment a future sales price, as homebuyers are more likely to value sustainable homes in this given market. If you intend to sell in the coming years, solar energy can make that choice even more lucrative.

If you are musing over solar, decide soon: this tax credit will no longer be available in 2021.

Hire an Accountant

There is no need to wade through the theme of taxes and homeownership alone. If you’re weary of scrolling through posts like these, consider hiring an accountant.

Many homeowners fear the cost of accounting services, especially when they’ve just forked over a hefty down payment for a new home; however, the right accountant can ensure that you are maximizing your deductions and refund.

You may also wish to consider e-filing. E-filing software like TurboTax can help you easily and quickly file returns—both federal and state—and explore all viable deductions. Most software giants have specific programs for specific filers, such as self-employed or investor filing.

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Kate King

Kate King is a freelance writer, editor, and blogger. 

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