The 2013 tax season has passed, but it’s not too early to prepare for your 2014 taxes. Did you know that the tax code is 4 million words and over 70,000 pages long? Most Americans tap into fewer than 15 pages of it when filing their returns. To make sure you’re not missing anything you’re due, here are two of the real estate-related tax breaks that are often missed, overlooked and underused.
State and Local Tax Breaks for Green Improvements
If you’ve improved your home for efficiency, it’s important to keep track of those items, because they are often eligible for state, county and city tax credits. Included in the list would be dual-paned windows, insulation, low-flow plumbing appliances, tankless water heaters, and solar panels. While some of these items may have exclusions, it’s better to mention the items to your tax preparer.
Mortgage Interest Tax Break
Buying a home and deducting the mortgage interest continues to be a major factor for many homebuyers. In a survey conducted by the California Association of Realtors, 79 percent of people who bought a home in 2012 said the mortgage interest and property tax deductions were “extremely important” to their decision to buy. This deduction can only be used when a taxpayer itemizes, however. According to the American Institute for Economics Research, only about 63 percent of home owners itemize deductions. It’s certainly worth a look to determine if itemizing makes sense for your situation.
If you paid points to get a better rate on your home loan that may be a tax break too. The IRS lets you deduct points in the year you paid them if, among other things, the loan is to purchase or build your main home, payment of points is an established business practice in your area and the points were within the usual range.
More Good News: Taxes When You Sell
When you decide to move to another home, you’ll be able to avoid some taxes on the profit you make. Years ago, a homeowner had to use the sale proceeds to buy another house. In 1997, the law was changed so that up to $250,000 in sales gain ($500,000 for married, filing jointly) is tax-free as long as the homeowner owned the property for two years and lived in it for two of the five years before the sale.
When you’re ready to buy a home or sell your existing home, contact Bowen Agency Realtors at any of our convenient locations.