It’s tax time again! People are always talking about tax write-off’s being one of the benefits of home ownership. But what are the options? We’ve compiled the top 5…make sure you consult a tax professional for detailed information (We are just sharing)!
- Mortgage Interest Statement (IRS Form 1098). The largest tax deduction for real estate is the one that allows you to deduct 100 percent of the mortgage interest you paid in a year (this includes prepaid interest or points you might have paid at close of escrow if you bought a home last year). Look for Form 1098 from your mortgage lender that reports how much that interest totaled up to last year. Make sure you include this form with your tax form when you file!
- Property Tax Statements. If you own a home you are eligible to deduct the property taxes you pay to your local city, county and/or state. Be careful not to include some of the miscellaneous expenses that some agencies bundle up with the taxes they collect (ie, waste management and local assessments for things like street lighting). Have your property tax statements at hand and make sure you’re only deducting what’s allowed. If you bought your home this year, it’s highly possible that you might not even have received a property tax statement yet – if that’s the case, look to your Uniform Settlement Statement (HUD). Usually, you would have received this right after closing. It contains an accounting of credits and debits for you and your home’s buyer or seller.
- Moving Expense Receipts. Moving expenses are tax deductible, if your move is closely related to the start of work at a new or changed job location. You must also meet the IRS’ time and distance tests, which can loosely be interpreted as a move 50 miles farther from your new workplace than your old house, and you must work essentially full-time. So, if you bought or sold a home and moved in 2011, you’ll need to include receipts from expenses you incurred making the move (meals not included) in your tax package.
- Utility statements for home office. If there is a part of your home that is “regularly and exclusively” used for business, you might be able to claim that portion of your home as a home office, and therefor deduct some portion of your home utilities and costs of painting and repairs. Talk with your tax provider about what expenses are allowable to be claimed under your home office deduction.
- Income and Expense statements from rental properties. If you are a landlord, your tax situation is more complicated. You’ll need to have complete income and expense statements when you put your tax returns together. Consult with a tax professional to make sure you are appropriately depreciating the property over time and not taking deductions that will expose you to the risk of audits, as well as to begin cultivating a long-term tax strategy for your real estate portfolio.
If you’d like to start benefiting from some of these tax deductions, and become a home owner (or investor) call us today!
Danielle Ervin
Luxury Living in Chino Hills 