The new year is here! For homeowners, this is a good time to get home paperwork and finances in order. Here are some things that you can start gathering and organizing.
Did you buy a home this year? If so, you’ll want to put aside some of the paperwork from your closing. Look for a document titled “Closing Disclosure” or something similar. It should contain details of your closing costs, such as pre-paid interest, taxes, insurance, etc. Although some of this information will be included in the tax form from your lender (which you will receive in January/February), there may be some additional tax deductible items listed on the closing disclosure.
During the year, you likely paid for different types of home repairs. Whether you hired contractors or purchased supplies on your own, it’s a good idea to keep track of the total expenses. Even if it cannot be used on your taxes this year, it will be needed to determine your future profit and possible capital gains taxes when you go to sell your home in the future. Some receipts will fade over time, so consider scanning them into electronic form.
If you have investment properties or use part of your home for business, you will need to calculate your utility expenses. Some or all of it may be tax deductible. If certain utilities apply only to your business use, then be sure to note that as well.
Insurance and taxes
Homeowner’s insurance and taxes may be included in your monthly mortgage payment, but you should retain the statements for these two expenses. Sometimes the calculations are a bit off. For instance, you pay for insurance yearly, but that may not fall on a calendar year. The same goes for property taxes. Many municipalities have tax bills that cover both previous and future months. You may need to prorate or adjust these expenses for the current year.
Organizing the information
Take the time to organize your statements and summarize your expenses based on the categories listed above. This will make it easier to prepare your taxes. It should also be stored for future reference, even if not used for income tax preparation. By completing this on a yearly basis, you maximize your tax deductions and minimize the chances of losing critical documents.