It’s that time of year again to go and get your taxes done. Whether you’re a current homeowner, landlord, or if you’ve bought or sold a home in the past year, these events are going to impact your taxes and write-offs.
If you’ve bought a home in the past year, you will likely have different write-offs than if you’ve owned your current home for years. You’ll also have different write-offs if you’ve recently sold a home as well. It’s important to familiarize yourself with current tax laws and common write-offs so you know what you need to bring to your tax appointment. Know that tax brackets have adjusted slightly for 2022 and this is something your tax professional can help you with. To get an idea of common write-offs and best practices when it comes to real estate, below are some things to consider when getting your taxes done:
1. Standard vs itemized deduction
You don’t need to be extremely familiar with the differences between standard and itemized deductions but if you have a working definition of these things, you can understand how these may benefit you. Basically, deductions help you to lower your tax bill and possibly enable you to receive more money back. Standard deductions are a fixed amount while itemized deductions are more of a list of eligible expenses. Your tax professional can help you determine which one benefits you the most.
2. Common Deductions
Since deductions are the best way to lower your tax bill, you’ll want to be familiar with these write-offs so you can let your tax professional know what applies to your situation. Deductions for rental property, your primary residence or a home you just sold can vary. Some common deductions, though this list is not exhaustive, as they related to home ownership are:
- Mortgage interest
- Home equity loan interest
- Property tax
- Some improvement projects and renovations
- Home office space
- Mortgage insurance, but not fire insurance
- Mileage for landlords who have to drive to their rental property
3. Things That Are Not Deductible
While there are many things you can write-off, there are also things you can’t write off and these usually go without exception. Some common things that are not deductible when it comes to real estate include:
- Fire insurance
- Your down payment on a new home
- Home insurance premiums
- Homeowner association (HOA) fees
- Utility bills (light, gas, water, etc…)
Also understand that deductions and write-offs will look different for first-time homebuyers as opposed to those who have been in their home for years or have multiple homes. It is always recommended that you consult a tax professional so they can guide you in the right direction.
Do you want more tips on taxes and home ownership? Are you in the market to buy or sell your home? Call and text me at (720) 323-4176 or email me at [email protected]