As Americans begin to gather tax documents preparing to file taxes, many might notice things look different than they have in years past. The tax reform bill that was passed at the end of 2017 may affect deductions and refunds for many Americans. Specifically, the standardized deduction amount has changed and some of the costs associated with home ownership may or may not be tax deductible this year.
In an article published by House Logic, a detailed summary of the tax deductions as they relate to many of the common home buying and home ownership costs is provided. For example, when it comes to the closing costs associated with purchasing a home, homeowners purchasing a home for less than $750,000 will find that closing costs, mortgage interest paid and some loan origination fees are tax deductible. However, it might not be beneficial to itemize these costs if they don’t total more than the standard deduction. Further, several home purchase expenses are not tax deductible, such as attorney fees, home inspections, and title fees to name a few.
Some other categories of home expenses covered in the article are home equity loan interest, which can only be deducted when the funds are used to improve the property and the total loan amount doesn’t exceed $750,000. State and Local taxes, damage to home after a natural disaster, moving expenses, use of a home office and student loans are also covered.
Homeowners and all American filing taxes this year should pay special attention to these changes and how they affect their tax return. Read the entire article.
Working from home a few days a week or even full time has become a more popular option and benefit offered by employers. Not only does it allow for flexibility in the work day, it can help save money normally spent on commuting costs, eating out, and wardrobe purchases, to name a few. Another cost saving measure can come in the form of a tax write off, the Home Office Tax Deduction.
According to an article written by Margaret Heidenry published by realtor.com, “the home office deduction allows you to write off part of your home expenses on your business tax return by separating out the costs associated with using your home for personal purposes (making pancakes) and business (answering work email).” It is important to understand, however, if your work from home situation actually qualifies for a home office write off.
First off, the “home office” has to be an area of your home used solely for the purpose of conducting the work associated with the business. It cannot be used for any other functions unrelated to the employee’s work and still qualify for the deduction. It is also required that the work from home arrangement be in place in order to provide convenience to the employer, not simply a preference of the employee. An example of this would be if the employer did not have a physical office space for the employee to work from. If these qualifications are met, claiming the home office on your taxes can be completed via a couple different methods detailed by Heidenry’s article.
Read the entire article.
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As you prepare your taxes this year, you may or may not notice a re-designed form 1098, the form used to report the amount you paid in mortgage interest for the tax year. Although there have not been any changes made to the mortgage interest deduction regulations in several years, in 2015 the U.S. Congress did pass new rules with regard to how mortgage interest is reported. The form now requires more details to ensure homeowners’ properties and mortgages indeed qualify.
According to an article published by Kiplinger, titled Mortgage Interest Tax Deductions May Get Extra Scrutiny This Year, “The new form will include the mortgage origination date, the balance at the end of last year and the address of the property securing the loan, as well as other information useful to the IRS.” As a result, we could see the IRS perform more audits that specifically focus on mortgage interest.
Therefore, it is important for homeowners to have a clear understanding of what properties qualify for mortgage interest deductions as well as how much and what kind of debt falls within the IRS guidelines before filing your taxes this year.
The Kiplinger article provides specific details and helpful examples, click here to read the entire article.
Most homeowners are aware, or at least should be aware, of tax breaks available to them via various homeowner tax laws. The homeowner tax breaks are designed to make owning a home more appealing and, in many cases, more affordable to the home owner.
In the article 2017 Mortgage Deduction: What Every Taxpayer Should Know published by FoxBusiness.com, the journalist details the types of tax breaks homeowners can take advantage of when filing their taxes each spring. The most common, the mortgage interest deduction, journalist Dan Capinger describes by writing, “Homeowners can typically take the mortgage interest they pay for loans on their home and include it in their itemized deductions.” This can apply to the cost of buying or building your home; even major home improvements can qualify. The current restriction is that the principal balance falls below $1 million for tax payers that file jointly.
However, as the United States prepares to inaugurate president-elect Trump, changes to the mortgage interest deductions are anticipated. During the 2016 presidential campaign, Trump expressed interest in limiting itemized deductions to $200,000 for joint filer; subsequently resulting in a lower cap on mortgage interest deductions.
The potential changes aren’t expected to make any significant impact to most homeowners. Therefore, homeowners should still look for many of these tax benefits to continue to be available, providing access to helpful tax cuts.
Read the entire article for additional details on tax laws available to homeowners.
Photo Credit: Darren Shaw