The tax reforms enacted in 2018 are likely to have changed your taxes in many ways – some positive and some negative. You should work with a tax expert to make sure you can take advantage of all the tax benefits that apply to you. If you are a homeowner, here are a couple of tax tips specific to you.
Determine if you should Itemize Your Deductions. Taxpayers only benefit from itemizing if the total itemized deductions are bigger than the standard deduction.
$12K for single taxpayers and $24K for married taxpayers filing jointly. So what can you deduct if you itemize?
State & local ta1xes. There is a $10,000 combined cap on state and local deductions – this includes property tax, real estate tax, income tax and sales tax
Mortgage Interest. On up to two homes – a primary and second home. If your mortgage was taken out before 12/15/17 you can deduct the interest up to $1M in loan amount, after that you are limited to $750K loan amount.
Non-Housing Related Deductions. Here are other deductions that you might be able to claim. Charitable donations. Donations to qualified tax-exempt organizations and you don’t benefit or get anything in return for the donation; Public Donations. Donations to federal, state and local governments for public purposes (for example a fund to rehab a public park); and Medical Expenses (exceeding 7.5% of adjusted gross income).
Minimize, if possible, Capital Gain Taxes related to your 2018 Home. When you sell a home that has been your primary residence for at least 2 of the past 5 years, you can typically exclude $250K for individuals or $500K for married taxpayers filing jointly, of the gain from taxable income. However, if your home has gained more, then it pays to have the following records:
HUD or Closing Disclosure Statement from your purchase. This shows the original costs including closing costs.
HUD or Closing Disclosure Statement from your sale. This shows how much you received, less closing costs.
Receipts for Substantial Improvements. If you improved your home – adding value to prolong its life or adapt it to new uses (kitchen remodels, room additions, finishing a basement, adding air conditioning, etc.) then you can add that to the cost of the home reducing your gain calculation.
This Guest Column provided by The Blue Team. Please note, we are not tax advisers so before acting on the tips noted above, please work with a financial adviser/accountant that is familiar with your personal finances. Want to explore your home selling and buying options? Contact the Blue Team - we would love to help you! www.BlueRealEstateTeam.com