As the deadline to file your income taxes draws near, it is important not to make any tax mistakes on tax deductions and credits you are eligible for as a Denver homeowner. Here are a few of the common tax mistakes that homeowners make and that you should be aware of.
Claiming property taxes in the wrong year- Property taxes that you pay each year are tax deductible in the year in which they were paid. There are many taxing authorities that will work a year behind, which causes many taxpayers confusion. The year you actually pay the tax is the same year you will claim it.
Do not let escrow accounts confuse you- Another common error is confusing the escrow amount with the actual amount of taxes paid. If your mortgage lender escrows funds to pay your yearly property taxes and insurance, do not just assume you will deduct the amount that is escrowed. This amount tends to be a little more or a little less than what is actually paid out.
Points paid in refinancing- Many Denver homeowners are taking advantage of low mortgage rates and are refinancing. When you refinance your mortgage loan the points you pay to do so must be deducted over the life of the loan. For instance, if you paid $2,000 in points for a 20 year loan you would be able to deduct $100 a year for 20 years.
Home office deductions-Taking deductions for a home office can be complicated. Keep in mind that if you turn a profit upon the sale of your home, the deductions have to be recaptured. Be sure to only claim this deduction if the positives outweigh the drawbacks.
First -time homebuyer tax credit- If you took advantage of the first-time home buyer tax credit that was originally offered in 2008 you are required to repay 1/15th of it over a 15 year span. If you need to determine how much you should deduct, the IRS has a wonderful tool to help.
Home-related expenses- Saving all receipts for any home office and home maintenance and repair costs is essential. If you are taking advantage of any energy tax credits it is necessary that you save all manufacturers’ certification statements.
Do not forget to track capital gains- If you sold your home last year, do not forget to file capital gains tax on any profit you made. You are eligible to exclude up to $250,000 in gain (or $500,000 if you’re a married couple) from your taxes.
Mortgage interest deduction- Interest paid on your mortgage yearly is deductible up to $1 million of mortgage debt. If your debt is more than $1 million, the excess above $1 million cannot be claimed.
The Bandy Team is here to help with all your real estate needs. At The Bandy Team, we help new Denver homebuyers as well as sellers with all their real estate needs and we will help you work through any issues that may arise in buying or selling a Denver property.
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Until next time,
Marianne Bandy, Team Leader
The Bandy Team
Keller Williams Park Meadows
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