As the year comes to an end, it’s time to start thinking about tax season, especially if you are a homeowner. You will want to take advantage of all possible tax deductions to lower your tax burden. This is the first year that the new tax law takes effect, so many people are anxious to see whether their taxes will be lower or higher this year. Preparing for tax time and home ownership deductions will help you get your taxes done quickly and more easily. Here are a few things that you can do to prepare.
If you purchased a new home or recently refinanced, you should find a copy of the closing paperwork. The closing disclosure itemizes your expenses such as lending fees, pre-paids, etc. Some of your mortgage-related expenses may be tax deductible. Your accountant or tax preparer will know exactly what to look for in the itemized closing statement.
The interest paid on your home loan may be tax deductible as well. Your mortgage lender will mail you a 1098 form in January that summarizes what you paid in interest over the year. Be sure to provide this form to your accountant as well.
Property taxes may also be deductible, although to a lesser amount this year. Under the new tax law, you may deduct up to $10,000 of local taxes. This includes both property taxes and local income taxes. If you live in an area with high property taxes or a state income tax, the benefit of this deduction will be less than in the previous years, but it is still an important deduction to take advantage of.
Sum up property expenses for business use of home
If you use your home for business or own an investment property, you should gather receipts for all expenses related to the property. Many of them will be deductible either in part or whole. Here are examples of possible expenditures:
- Property insurance
- Repair costs
- Contract/labor costs
- Property maintenance expenses
Preparing for tax time and home ownership deductions
Gathering necessary receipts and other paperwork ahead of time will make tax preparation easier on both you and your accountant. Whether your tax liability increases or decreases this year will depend on many factors including your income and tax bracket. Improve the chances of lowering your taxes by applying all possible tax deductions, particularly as it relates to your home ownership.