Top Tax Deductions for Homeowners to Reduce Your Tax Burden
It is impossible to avoid paying taxes without getting in trouble with the IRS, and we must all contribute our fair part. Paying your fair share, on the other hand, should not be an undue hardship. Because you pay both income and property taxes as a homeowner, your tax burden is twofold. Take advantage of these homeowner tax deductions to reduce that load and increase your tax savings. You can put your tax savings toward bills owed, home maintenance, saving toward an investment, or something fun.
Using Your Tax Deduction to Improve Your Home
Many people don't seem to have enough money to keep their homes in tip-top shape. Home maintenance is very important to keep larger repair expenditures from happening down the road. This will help you build equity and not be faced with big repairs if you sell your property in the future.
With the ever-increasing prices of utilities like natural gas and electricity, energy-efficient purchases like storm doors, insulation, and energy-efficient air-conditioning and heating systems can earn you a $500 tax credit. You may save $200 by replacing your outdated windows with energy-efficient ones. This credit is set to expire on December 31st of this year. As a result, this year will be your final opportunity to receive a tax credit for making your home more energy-efficient.
You may also be eligible for the Renewable Energy Efficiency Property Credit if you install equipment that utilizes renewable energy sources. The credit covers 30% of the equipment and installation costs. This credit is also set to expire on December 31st of this year.
Refinancing and Mortgage Interest
If your monthly mortgage payment makes you wince, you'll be relieved to learn that you can deduct taxes on the following items:
* Mortgage interest
* Mortgage payments for any additional properties you own
* Rental properties owned by you
* Home equity lines of credit (HELOC) and refinancing up to $100,000 of debt
Mortgage interest on additional homes is deductible if you own numerous properties. Were you aware that It doesn't have to be a house? It can be a boat or an RV; it counts as additional property if it has cooking, sleeping, and bathroom facilities. I didn't know that!
If you own a second home and rent it out, you must live there (vacation or some kind of visit) for at least 14 days at the property or spend more than 10% of the number of days you rent it out. We have a 2nd home that we rent out once in a while to friends (only if they stay for more than 10 days and bring other people with them), and family or friends of people we know. We don't advertise so although we might not know our renters, someone that we do know does. We spend more than 14 days in a year there and don't rent it out that much in a year's time. But this is another rule I didn't know about.
If any of the following events occurred during the year in which you took out your mortgage, you may be able to claim the points you paid:
* The loan was for the purchase or construction of your primary residence
* Point payment is a standard business procedure in your location, and the points were within the normal range
Real estate taxes
This is the most important one. Your annual property taxes are tax-deductible. On your lender's annual statement, the amount of property taxes you paid for the year is listed. On your Schedule A tax form, you will deduct them as an itemized expense.
Look at your settlement document for additional tax payment information if you're a first-time homebuyer. You can deduct the portion of your property taxes that you paid in your first year as a homeowner.
Objecting to Your Assessment in Order to Reduce Your Property Taxes
You must pay property taxes, but you can ensure that you pay a fair amount based on the genuine value of your
home and land. Many homes are overvalued because assessors make mistakes when evaluating them and homeowners don't notice. As a result, homeowners unintentionally pay higher property taxes than they should.
If you've owned your home for more than a year, though, you may be able to reduce your property tax bill by demonstrating that it has been overvalued, which means your tax assessment suggests your home is worth more than it is.
Even if the number on the tax assessment appears to be close, you might consider filing a tax protest. A successful tax protest can save you up to 15% on your taxes!
The national median property tax paid, according to SmartAsset, is $2,839.00. That's roughly 1.192 percent of a $238,200.00 property.
If you're able to reduce your assessed value by 15 percent to $202,470.00 and consequently save 15 percent on your tax bill, your new tax bill will be about 2,413.00. That’s a savings of $426.00!
To get started protesting your property tax, read your assessment letter. Your assessment letter will list data about your property and the assessed value of your house and land. Make sure your assessment letter has the correct information about your property.
Understanding that assessors can make mistakes assessing your home value will help you with your appeal. There are three key mistakes assessors make when assessing property. These mistakes include:
1. Assessors will sometimes use sales data from earlier years that is out of date. Because the real estate market is fluid, this data can overvalue your home because it changes so frequently.
2. Assessors that employ mass assessment methods, on the other hand, do not take into consideration all of the market modifications that have occurred over time. As a result, sales data can't always provide comparable properties that may be used to establish future sales.
3. Living Area: Assessors are infamous for making mistakes when it comes to your home's living area. If you live in a 1.5 or 2-story house, this is especially true. Examine any past appraisals to check that our home's measurements and description are accurate. Is the number of bedrooms and bathrooms on the assessment letter correct? Is the lot size correct? A typo can change a lot size by a lot!
I've had past clients call me if they don't agree with their home's assessment. We can find three to five approximate values of comparable properties similar to yours, and these comps can then be used to support your claim that your home is overvalued.
You'll have 30 days to file an appeal of your assessment, so you’ll want to get the comps from your agent as soon as your overpriced assessment arrives in the mail. You can make a phone call to an assessor to request a formal review.
You'll then need to fill out a form and follow specific instructions regarding your supporting evidence. Typically, it's not necessary for you to appear at the review. The review can take one to three months to complete, and you'll receive a decision in writing.
The majority of assessment appeals are successful. However, if at first you don't succeed, appeal. You'll need to pay a small filing fee for an independent appeals board to hear your second appeal. This process could take up to a year to complete, so you'll need to decide whether it's truly worth it.
After that, you'll need to fill out a form and adhere to specified guidelines regarding your supporting proof. It is usually not essential for you to attend the review. It may take one to three months for the review to be completed, and you will receive a written decision.
I know several people who were successful at protesting their tax assessments, but that isn't a guarantee. If you don't succeed the first time, you can appeal. You'll have to pay a minor filing fee to have your second appeal heard by an impartial appeals board. Because this procedure could take up to a year to complete, you must consider if it is genuinely worthwhile.
If it all sounds like too much work on your part, there are tax appeal companies and real estate attorneys that will handle almost everything for you. You will normally pay them a percentage of what they saved you.
Posted by Judy Orr on
Leave A Comment