Tax experts have
identified common errors that homeowners make when filing taxes. Read below to
ensure that you don’t make the same mistakes!
When filing property taxes, enter
whatever amount you actually paid that year on federal forms, regardless of the
date on your tax bill.
It’s common for homeowners to deduct the wrong year for property taxes;
remember that homeowners take tax deductions for property taxes in the year
they actually pay them.
Differentiate between escrow amount and
actual taxes paid. If
your lender escrows funds to pay your property taxes, don’t simply deduct this
amount. List actual taxes paid (not 12 months of escrow property tax payments)
as specified by your lender’s official statement.
Deduct points over the life of your new
loan when you refinance your home, rather than only deducting points paid to your lender to secure your full mortgage in the year
you bought your home.
Track home related expenses and capital
gains. Expenses may include
home improvement and home office costs (on a side note, home office deductions
are complicated—read the fine lines when determining your deductions). Also, file
records that document statements such as energy tax credits and confirmation
of paid property taxes. Remember to pay capital gains taxes on any profit
derived from selling your main home. Single owners and married couples can
exclude $250,000 and $500,000, respectively, of profits from taxes.
Know how much to claim for the mortgage
interest tax deduction:
taxpayers may deduct mortgage interest on home acquisition debt up to $1
million, and another $100,000 on home equity debt.
Following these
guidelines should help you maximize tax deductions and minimize encounters with
the IRS. For more in-depth information published directly by the IRS, click here. The video below discusses what you can and cannot deduct on federal income tax:
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