Tax Tips for Homeowners
Deductions, Historic Properties, Home Office, IRS, Moving, PMI, realestate, Tax Tips, taxes, Upgrades
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter. Michael Kwiatkowski is a Real Estate Broker licensed in the State of Wisconsin. He is not a tax advisor or CPA and cannot offer tax or financial advice. Remember that tax law treats primary residences, secondary residences/vacation comes, and investment properties differently. Please contact a tax advisor or CPA if you wish to have formal written advice on these matters.
Did you know that home and property owners generally receive preferential treatment from the IRS at tax time? Unfortunately, a lot of people don’t know and overpay Uncle Sam! Everybody knows about the mortgage interest tax deduction. How about ten more tax tips for homeowners?
Sale Expenses and Profits
- Sales costs: If you sold your home, you may deduct real estate agent commissions paid, legal fees, and closing costs!
- Source: “IRS Publication 523, Selling Your Home” found at http://www.irs.gov/publications/p523/index.html
- Mitigating profits on the sale of a home: The IRS normally allows sellers to profit up to $250,000.00 on the sale of their home tax free. Profit above that amount is generally taxed. However, sellers can usually deduct the cost of renovations and other expenses.
- Source: “IRS Topic 701 – Sale of Your Home” found at http://www.irs.gov/taxtopics/tc701.html
Making Tragedies Less Taxing
- Deducting losses through fire, theft, or other incidents: Did you get burglarized or suffer a house fire? Did an ice storm send a tree branch through your garage? If the total casualty loss is not reimbursed by insurance and that amount is more than 10% of your gross income, IRS Form 4684 generally allows you to deduct the non-reimbursed amount!
- Source: “IRS Form 4684, Casualties and Thefts,” found at http://www.irs.gov/uac/Form-4684,-Casualties-and-Thefts and “Tax Topic 515 – Casualty, Disaster and Theft Losses” found at http://www.irs.gov/taxtopics/tc515.html
- Tax exemption for debt forgiven from a short sale: The IRS generally treats forgiven debts as taxable income. From 2007-2014, the Mortgage Forgiveness Debt Relief Act generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. While an especially complicated area of tax code and should be approached with a professional, using the Mortgage Forgiveness Debt Relief Act could result in significant tax savings.
- Source: “The Mortgage Forgiveness Debt Relief Act and Debt Cancellation” on the IRS website at http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation-
Moving for Business and Employment
- Moving Expenses: Did you move due to a change in employment or due to your business moving? If so, you may deduct most moving-related expenses!
- Source: IRS Topic 455 – Moving Expenses” found at http://www.irs.gov/taxtopics/tc455.html
More Common Situations
- Private Mortgage Insurance (PMI) Deduction: Legislators passed an extension of certain tax breaks related to the payment of PMI; it can be deductible! (But consider using your refund money to pay down your mortgage. PMI is a waste of your money!)
- Source: H&R Block at http://www.hrblock.com/tax-answers/services/jsp/article.jsp?article_id=66871
- Local real estate taxes paid deduction: Local, county, state, and foreign real estate taxes paid can generally be deducted on your federal tax return!
- Source: See “Deductible Real Estate Taxes” at the IRS’ official website at http://www.irs.gov/publications/p530/ar02.html
- Home office deduction: Do you use part of your home for business? If so, you may be able to deduct expenses for the business use of your home!
- Source: See “Home Office Deduction” at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Home-Office-Deduction for more information.
- Home energy efficiency upgrades: Did you upgrade your home to improve its energy efficiency? If you installed solar, wind, or geothermal energy upgrades, you could be eligible for a tax credit!
- Source: Learn more at https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/Energy-Tax-Credit–Which-Home-Improvements-Qualify-/INF12111.html and by looking at “IRS Form 5695 – Residential Energy Credits” found at Form 5695, Residential Energy Credits at http://www.irs.gov/uac/Form-5695,-Residential-Energy-Credits
Renovation and Repair of Historic Properties
- Historic home renovation tax credits: There are federal and frequently state tax benefits for rehabilitating historic buildings. Tax rules for deducting the renovation costs of designated historic homes are complex and must be approached with a CPA or tax professional familiar with those rules. However, eligible homeowners and investors who go through the trouble of researching these rules frequently receive very preferential tax benefits!
- Source: Seek out a competent CPA or tax professional and take a look at these three web sites:
http://www.houselogic.com/home-advice/tax-deductions/tax-incentives-historic-preservation/
http://www.wisconsinhistory.org/Content.aspx?dsNav=N:1214
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter. Michael Kwiatkowski is a Real Estate Broker licensed in the State of Wisconsin. He is not a tax advisor or CPA and cannot offer tax or financial advice. Remember that tax law treats primary residences, secondary residences/vacation comes, and investment properties differently. Please contact a tax advisor or CPA if you wish to have formal written advice on these matters.