Tax season is upon us and one big question runs through all taxpayers’ minds: to itemize or not to itemize? While standard tax deduction lowers taxpayer’s income by one fixed amount and is often easier than itemizing individual deductions, homeowners may want to think twice. Homeowners have access to several tax deduction options that could potentially lower their taxable income even further and allow them to receive more money back.
Moving expenses can add up quickly but moving into a new home doesn’t have to be a total loss. Homeowners who relocated for a new job are eligible to write off some of their moving costs. Like most deductions, there are certain requirements that must be met in order to deduct. The homeowner’s new job must be a certain distance from the new and old home, and they must be working full-time for a minimum of 39 weeks after the move. If eligible, homeowners can deduct expenses on traveling costs, storage unit(s) costs, lodging costs and even the cost of moving family pets.
The mortgage interest deduction, one of the most popular tax break options, allows homeowners to deduct any loan interest they pay to build, purchase or fix up their home. When making mortgage payments, the majority of the money paid goes toward the loan interest, meaning that homeowners can receive great savings from simply itemizing the mortgage alone. Homeowners that bought a home after December 15, 2017, are eligible to deduct up to $750,000 on the mortgage while those who bought before are grandfathered in to the $1 million plan.
Homeowners that itemize their taxes can also deduct property taxes paid on their main residence or any other real estate they own. Starting from the home’s date of purchase, homeowners pay state and local property taxes each time a mortgage payment is made. Note that this does not include portions of the tax bill, such as property taxes not yet paid, delivery services like trash collection and assessments for local benefits such as building new streets and sidewalks.
Homeowners that run a small business or work from home can take out a deduction for expenses of their home office. To be eligible, homeowners must have a dedicated office space in their home that is used regularly and exclusively for business. Many homeowners avoid or don’t take advantage of the home office deduction due to it being tricky to figure out. However, the IRS has made claiming home office deduction a lot easier with a simplified home office deduction. Rather than having to figure out the utilities and expenses, the IRS’ simplified method deduction allows homeowners to simply multiply the office’s square footage by $5 to reach the deduction amount.
Damage to a home can be a nightmare for homeowners. While home warranties and insurance often cover property damage, they don’t always cover all of it. Luckily, the IRS allows homeowners to claim deductions on recoverable losses on their home. It must be noted that casualty is a large category and the IRS has specific rules guidelines for what counts as a casualty loss. According to the IRS, the loss must be caused by a “sudden, unexpected or unusual” event such as theft with criminal intent or a natural disaster. Homeowners can only write off casualty losses if they itemize their taxes and must use the property’s fair market value. To deduct casualty loss, homeowners should reduce each casualty loss by subtracting $100 per event as well as 10% of their adjusted growth income.
To learn more about living the sweet life and becoming a tax-deductible homeowner at Spring House at Honey Farms by Brenner Poole Homes, visit www.HoneyFarmsLiving.com.