Be Prepared as you begin the Process of Home Owner Tax Prep!
Step one as you get ready to file taxes this year, get organized. Some of the potential deductions available to you might not occur this year. But you’ll want to keep good records for the future. As you go about your home owner tax prep, consider making electronic copies of important receipts, which can fade over time.
Also, now is a good time, if you just purchased your home, to find the Closing Disclosure from your purchase and set this aside with your tax documents. There are potential write-off’s on that document such as pre-paid interest and certain fees. If you paid any points related to your mortgage, these are a potential tax write off.
Trump Tax Overhaul Reduces Mortgage Interest Deduction
The big change for this year is that the new tax code only allows for writing off the first $750,000 of your mortgage interest deduction. In prior years of home owner tax prep, you were able to count on writing off the first cool million. This change might have an impact on the real estate market, check back later this year as I write more about that.
Your mortgage lender should send you a year end statement in January/February showing exactly how much interest was paid. Keep that document handy for filing your tax return.
Home Equity Loan Deduction
This type of loan has its own rules for deducting interest. According to Turbo Tax, “as a general rule you can deduct interest up to $100,000.” Best of all, home owners can use the money from HELOC financing for anything – it could be a home remodel or a new car or a college education.
Home Energy Efficiency Deductions
Did you make any improvements to your new home involving energy energy efficiency, or a new roof or alternative heating systems such as geothermal? Keep the receipts for all of this as some home improvements are subject to special tax incentives. Other improvements, such as landscaping have no deduction today, but might have an impact in the future when determining taxable value when you go to sell. This is especially good advice for new home buyers!
Real Estate Tax Shelter
For those that sold a home in 2017, (assuming you were on title, US national, owned the home in your name), there are some potential tax savings this year. If you lived in the property as your primary residence for two of the last five years, you can shelter the first $250,000 in gains (for a single person), $500,000 for a married couple, from taxes. Very important as you record the sale on your 2018 tax return!
Boulder Investment Real Estate
A number of clients I assist hold some of their real estate as an investment property. If this is the case for you, some of your utility expense could be a write off. Keep good records all year long. This is really the best advice when it comes to home owner tax prep. Being prepared. You might also be able to write off some utility expenses if you use a portion of your residence for business. Or, if your family invested in a property for you to attend CU Boulder, great time to remind Mom & Dad about the tax savings of your college pad!
An Interesting Boulder Statistic
Last I saw, over $32 million dollars in taxes had been prepaid by Boulder County residents following the massive tax overhaul signed into law in December. Will be interesting to see how this impacts our economy, not to mention individuals tax filings.