Highlands Ranch Real Estate : Tuesday Tips : Tax Breaks for Homeowners
We thought this article was very timely, it being tax season and all, so we wanted to share the information with you. Tara-Nicolle Nelson from Inman News answered a question from a homeowner regarding the recent purchase of their home and how it will affect their taxes.
Owning a home is one of those landmarks that signify financial adulthood. And one of the things that responsible financial adults do is get professional help when the situation requires it. Taxes are one of those areas that often do warrant calling the pros in.
I'm not just schilling for the tax prep industry here, either: The ultimate aim of using a tax professional is to make sure you get every deduction, credit and other tax advantage for which you qualify, without jacking up your changes at triggering the universally dreaded Internal Revenue Service audit by claiming dubious deductions.
Hiring a tax preparer might be a worthwhile investment to make, even if just this year, so he or she can brief you on what records you should keep and strategies you should do moving forward, like home repair and improvement receipts, or documentation of your use of an area of the home as a home office.
Now, let's talk more substantively about the deductions that are available to you, in the event you do decide to itemize your taxes (IRS Publication 530 offers a more nuanced view into Tax Information for Homeowners).
1. Mortgage interest deduction. Assuming this home is your personal residence, 100 percent of the mortgage interest you owe and pay before December 31, 2011, is deductible on your 2011 taxes. In January, your mortgage lender will send you a form documenting the precise amount of interest you paid, although most lenders also now make this form immediately available to borrowers online.
Chances are good that you paid some amount of advance interest on your home loan at closing - - expect to see that on your statement from your lender, but you should also be able to find it on the HUD-1 settlement statement you received from your escrow agent at closing.
2. Property tax deductions. Again, assuming that this is the home you live in most of the time, you shou;ld be able to deduct 100 percent of the property taxes you've paid to your state and/or local taxing agency this year.
3. Closing-cost deductions. Discount points and origination fees paid to your mortgage lender and//or broker at closing are frequently deductible, but there are rules around this, which tax software and/or professionals can help you make sure you meet. Note that, according to Internal Revenue Service Publication 530, "YOu cannot deduct transfer taxes and similar taxes and changes on the sale of a personal home."
There are various home improvements (especially those that increase your home's energy efficiency), state and local tax credits for buying a foreclosure, and other tax advantages that might be available to you.
My advice is to work with an experienced, local tax preparer or, at the very least, use reputable tax preparation software to ensure that you get the maximum tax advantages available to you as a result of your new role as a homeowner.
Hope you find value in this information.