Year-End Tax Tips for Homeowners
One of the best advantages of being a homeowner is that it offers excellent tax advantages. Some deductions aren’t as attractive as they used to be prior to the Tax Cuts and Jobs Act (TCJA) of 2017. However, there are still some tax laws that you can use to your benefit if you own real property.
Now that the end of the year is almost upon us, there are a few last-minute moves you can make. There are also a few things that you may want to wait on that could help with your tax liabilities. Here are some year-end tax tips for homeowners:
1. Get Your Documents Organized
One of the best steps you can take now is to get all your homeownership documents, upgrade expenses, tax records and other documentation organized. You don’t want to wait until April to gather everything up and figure it all out. The more you have everything in order, the better off you will be when it comes time to file your taxes (especially if you are itemizing deductions).
2. Consider Itemizing
Speaking of itemized deductions, many new tax laws in the TCJA were designed to discourage taxpayers from itemizing. The standard deduction amounts were increased while some itemized homeownership deductions (such as mortgage interest) were reduced. Your task is to understand what can and can’t be deducted (and how much), and then decide if it’s worth the time and effort to itemize. It may not be.
3. Hire a Tax Professional
If you are planning to itemize or if you have real estate holdings beyond your primary residence, you should highly consider hiring a professional tax advisor. They will be able to guide you through the process and help you figure out your deductions. They know the tax laws and will make sure you file your taxes correctly to avoid audits and maximize your return.
4. Track Home Improvement Expenses
Home improvements generally make up a good chunk of tax-deductible homeownership expenses. If you spent money to upgrade your home or added energy-efficient features, you may benefit from some useful tax write-offs. Make sure you have tracked all your home improvement expenses throughout the year and get all the documentation gathered now.
5. Pay Some Expenses Now
If you are planning to make upgrades next year, there may be some expenses you can pay for now. Buy the materials or pay a deposit to your contractor before December 31. Consider paying your January/February mortgage payments early to deduct additional mortgage interest. Buy equipment for your home office.
6. Track Home Office Expenses
If you work from home (even if only part-time), there may be some home office expenses that you can deduct if you are planning to itemize. Home office equipment and even the office space itself (as a percentage of your mortgage payment) can be deducted. Track your home office expenses in detail and keep all receipts. If you are self-employed, you may consider holding off on sending December invoices until after January 1. This will defer your taxable income for this year if payments are invoiced/received next year. The same is true if you own rental property. Wait to collect December rent next year if it is an advantage to you.
7. Refinancing Deductions
Did you refinance your mortgage loan this year? Did you take any cash out with the loan? If so, you may be eligible for some tax breaks.
These are just a few year-end tax tips for homeowners. If you are planning to sell your house in the near future, contact PropertyLark. Let us help you explore your home selling options or make you a fair cash offer for a quick and convenient closing.