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Tax Season is Here! Good News for Homeowners: Four Tax Breaks for You!

     
February 16, 2014  |  Real Estate

Attention all homeowners! With tax season looming near in the horizon (here it goes again!), now is the time to get your paperwork done and in order. And what should you consider foremost? Of course, ways to minimize your tax liability! Whether you have a single-family home, condo unit, sprawling 5-bedroom with an enviable lawn and 3-car garage, or even a stilt house, you should always make sure that you know the right information about filing your taxes as a homeowner. There are some home-related expenses that you should be sure to deduct from your taxes.

Here are the tax breaks you should know about:

Mortgage Interest

Did you know that Americans save around $100 million every year with this tax deduction? You can take this on both your primary and secondary homes as long as your loan is less than a million dollars and itemize your return. This is such a big money saver, especially in the first few years of a home loan that homeowners can really take advantage of mortgage interest to save them from huge amounts of taxes.

Property Taxes

Property taxes must be taken as an itemized expense. Remember that the tax you pay every year is deductible providing that you own the property. You can check the property taxes you (or the holder of the escrow account) paid in 2013 in the recent annual statement you receive from your lender. Or, if your taxes are not included in the escrow payments that normally goes with the mortgage payments, you can check your cancelled checks instead. The amount of taxes you paid last year should be entered in your Federal Form.

Mortgage Points

Small things make a difference, and that includes deductions for paying your taxes. Mortgage points count too given you meet certain requirements. The IRS considers mortgage points (percentage-based fees which lenders charge to start a loan) as a form of mortgage interest paid in advance. Therefore, you can deduct these said points in full, in the year that you paid them. Let’s say you paid two points on a $250,000 mortgage in 2013. You can then deduct $5,000 on your 2013 tax return. If you on the other hand, refinanced a mortgage the previous year, then you would deduct the points over the terms or “life” of the loan. You can then deduct 1/30th of the points per year if say, it’s a 30-year mortgage. It may only be $33 a year in this case for each $1,000 of points you paid, but hey, every little thing counts. And with money-saving ideas, small steps come in high value!

Home Improvements/Renovation/Repairs

Anything you do to increase your home’s value can help you minimize your tax bill when the time comes that you decide to sell your home. But wait…repairs to return something to its original condition do NOT count. So if you are redoing your stair banisters because you used it as a work-out tool and crashed unexpectedly, then that certainly gets branded as a non-eligible repair. Unless you do a total make-over to change its look, quality, material, what have you. The same goes for adding a square footage to your home, remodeling your kitchen, putting on a new roof or making any other capital home improvements to your property. Then those add value to your home. And when they do up your home’s selling potential in the market, you get to lower your taxes. Just remember, that for every purchase, renovation, and improvements, receipts become treasures in filing your taxes. So, don’t shoot them in the trash but instead, save them as if your life depended on these tiny papers!

 

Source: Zillow/blogs

About the author

The Blake Team is a full-service Real Estate team based in Aurora, Colorado specializing in working with Buyers & Sellers, foreclosures/HUD, short sales, and luxury properties. A team with years of experience and an impressive success rate that made it the No.18 real estate brokerage in the nation, as well as the No.1 Keller Williams agent in Colorado led by CEO & Founder Lisa Blake. The Blake Team is your No. 1 choice for getting your dream home!