End of Year Tax Tips for Homeowners
For many, the end of the year represents a special time when memories are made and shared with family and friends. For others, it is a time to reflect and plan ahead. And for taxpayers everywhere, it is a time to consider which strategic moves could have you paying a little (or a lot) less come April 15th. Homeowners have an especially diverse range of options given all the ways that Uncle Sam tries to encourage the residential real estate market. Here are a few of the most important details of tax policy that you should take into account as the year winds down.
- Organize your documents. In order to save time, most taxpayers are offered the option to accept a standard tax deduction, which in 2016 ranged from $6,300 (for those filing single returns) and $12,600 (for married couples filing jointly.) For homeowners, however, it is oftentimes worth the extra effort to itemize your deductions, as this allows you to take advantage of a number of special tax opportunities related to homeownership. The key to efficient itemization is documentation, so take the end of the year as an opportunity to get all the documents you saved during that time in order. When the hustle and bustle of tax season comes around, you be glad you did!
- Understand debt cancellation policy. If your home is foreclosed on, or if you complete a short sale for the purpose of absolving your debts, you will be on the hook to pay taxes on the “income” from those sales–even if that income went straight toward paying off a mortgage!
- Resolve to work from home next year. Speaking of itemized deductions, one fantastic opportunity that homeowners can take advantage of is the home office deduction. This lets you write off expenses related to maintenance and upkeep of the office, as well as a few other expenses that can be generally useful to the entire home, such as wifi. Beware, however–there are a couple of specific rules related to home office deductions, and failing to follow them can land you in hot water. First of all, you should understand that your home office must be devoted exclusively to work purposed–so if you were thinking of working from your living room, or borrowing a bedroom during work hours, you’re out of luck. Secondly, you must use your home office on regular basis:even if you do have a spare room where you take business calls every now and then, it’s not enough to write off expenses unless you are working there frequently. Because working from home is becoming increasingly common, the IRS is loosening up a bit on its historically stringent definitions and enforcement of home office deduction rules, but it is important to know ht such a deduction could trigger an audit, so it’s important to keep proper documentation and play by the rules.
Learn more about the perks of homeownership at the Blue Marble Properties LLC company website.