Don't Make These Tax Mistakes!

If you're like Gil and me, you're already calculating your tax return and considering the deductions and credits to which we may or may not be entitled. HouseLogic offers several mistakes that home owners tend to make, and we wanted to share them to help you avoid running afoul of the IRS. They are:

Deducting the wrong year for property taxes: On your federal forms, enter the amount you actually paid in 2011, regardless of the date is on your tax bill.

Confusing escrow amount for actual taxes paid: The regular amount you pay into your escrow account each month to cover property taxes is probably a little more or a little less than your property tax bill. Your lender will adjust the amount every year or so to realign the two. Don’t just add up 12 months of escrow property tax payments.

Deducting points paid to refinance: If you paid $2,000 in points to refinance into a 15-year mortgage, your tax deduction is $133 per year.

Failing to deduct private mortgage insurance: The deduction begins to phase out once your adjusted gross income reaches $100,000 and disappears entirely when your AGI surpasses $109,000.

Misjudging the home office tax deduction: It’s complicated, often doesn’t amount to much of a deduction, has to be recaptured if you turn a profit when you sell your home, and can pique the IRS’s interest in your return.

Failing to track home-related expenses: File documents as you go. For example, save each manufacturer’s certification statement for energy tax credits, insurance company statements for PMI, and lender or government statements to confirm property taxes paid.

Forgetting to keep track of capital gains: If you sold your main home last year, don’t forget to pay capital gains taxes on any profit. However, you can exclude $250,000 (or $500,000 if you’re a married couple) of any profits from taxes.

Filing incorrectly for energy tax credits: If you made eligible improvements, complete Form 5695. Read the instructions carefully.

Claiming too much for the mortgage interest tax deduction: You can deduct mortgage interest only up to $1 million of mortgage debt.

Please note that this is NOT tax or legal adviceapplicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

The Marchany Team KNOWS central New Jersey. We're right where you are, whether you're in South Brunswick or Monroe (Middlesex County). If you're looking for a terrific new home in Mercer County, we're prepared to search for your place in the sun in Princeton Junction, East Windsor, West Windsor, and Robbinsville. And if you're ready to put your Franklin Park or Hillsborough (Somerset County) home on the market, we're prepared to find the buyers who are looking for your home. Call The Marchany Team today at (732) 997-0019, and don't forget to “Like” us on Facebook! We are dedicated to helping you in every way possible.