Did You Buy a Home Last Year?
With “tax day” quickly approaching many people are beginning to collect the necessary details and search for write offs. If you recently bought a home in the last year, there is good news! There are tax advantages available for you.
First let’s establish what is deductible
You may deduct up to $10,000 (if married filing separately it is $5,000) for a combination of property taxes and either sales taxes or state and local income taxes. You may be able to deduct property and real estate taxes you pay on your:
- Primary home
- Vacation home(s)
- Property outside the United States
- Cars, RVs, Boats and other vehicles
- As well as a Co-op apartment, but check IRS publication 530 for their special set of rules
If You Bought (or Sold) a Home Last Year
As a new home owner you are able to deduct many of the costs associated with your home loan or acquisition mortgage. If you owned property that was taxable for part of the year before selling it, you can deduct the taxes attributable to the time you owned the property. When you purchased your home, did your lender quote an interest rate as well as points for the loan? A “point” equals 1% of the loan amount. Take a look at your escrow closing statement for the amount of the loan fee as well as points, since that total amount qualifies as an itemized deduction.
If you sold your home that was your primary residence for two out of the last 5 years, there is up to $250,000 in profit tax-free gain for single taxpayers. If you are married and file a joint return, the tax-free amount doubles to $500,000 from a qualifying home sale; only one spouse needs to be listed on the title but both must meet the residency requirement of two out of five years. Unmarried co-owners who sell their primary residence after two years may each claim the $250,000 exemption. Up to four co-owners can qualify and each individually claim the exemption, for a million dollars tax-free!
Did you Move?
As a homeowner or renter you can deduct nearly all moving costs if their new job location is at least 50 miles further from your old home than from your previous job. You must also work atleast 39 weeks in the vicinity of your new job location, 78 weeks if you are self employed. Itemizing deductions are not necessary to take advantage of the moving cost tax adjustment if your situation qualifies. Some other moving-cost deductions you may qualify for are:
- Do-it-yourself moving trucks or pods
- Professional moving company services
- Gas or the standard moving mileage rate, if you are traveling by car
- Packing supplies such as blankets, tape, and boxes
- Move insurance
- Storage for up to 30 days after goods are moved, before they are delivered to your new home
If you are moving, don’t forget to take a peek at our Moving Checklist post that will help ease the stress of remembering everything!
How do I get a bigger property tax deduction?
You may have finished reading this article still wondering if there is “more” you can do – of course there is! Mike and Justin are excellent resources that can guide you during these exciting times and help you get the most bang for your buck. Here are some final tips on what you can do to increase your property tax deduction:
- Prepay your property taxes.
- Save your registration statements.
- Scrutinize your closing paperwork – take a look at what you paid at closing for property taxes.
- Ask Mike or Justin their advice.