Tax season can be a stressful time for many. This year’s deadline for filing was April 18th, but for those filing an extension they have until mid-October to get everything finalized and submitted to the IRS. For homeowners that additional time may be helpful to learn what tax deductions they may qualify for. Understanding the requirements and specific deductions available can be confusing, especially for first-time homeowners. If you filed an extension or want to prepare for next year, here are a few tips to help get you started:
- Take advantage of your home office
Using your home for business can help to save money on renting another space. If an area of your home is being used as your office, you might be eligible for a tax deduction. With so many people working from home the past few years, the requirements for deductions can get confusing. First, you must be a self-employed homeowner to take the tax deduction for your home office. If you are self-employed and use a specific room, multiple rooms, or a designated area of the home for work, this deduction is an option for you.
- Make the most out of your rental property
Some people are having their homes work. Offering your home or a room in your home as a short-term rental through Airbnb can qualify for tax benefits. These benefits come in the form of tax depreciation. It will vary depending on your specific situation, but it is worth looking into and discussing with your tax advisor or CPA.
- Energy efficient upgrades
Many people are looking to upgrade their homes and incorporate energy efficient elements that will benefit the environment. What they don’t always realize is these green changes can lead to tax benefits as well. There are a variety of options available that can qualify for a tax credit or benefit. These include installing solar panels or energy efficient windows, replacing older appliances with more energy efficient new appliances. Even rain barrels may offer a tax benefit. If you made any of these changes in the past year or plan to this year, it is good to research and factor in the tax credit you could receive. Before spending the money, check into the specific requirements that will allow you to secure the largest tax benefits.
- Start early and stay organized
There are a mix of federal tax credits and deductions available to homeowners. But you must keep detailed records of your home related expenses. If you already filed your taxes for the year, now is the time to start thinking about saving your receipts for the next tax season. This is especially important if you are planning to make any deductions on your home office or other home upgrades. We recommend establishing a filing system that allows you to keep track of any paperwork and financial records. Keep track of anything and everything that may be needed to secure your tax deductions for next year. You can start saving the hard copies or go digital by scanning the documents to be saved on your computer and then properly disposed of later. Both of these systems will ensure you have everything you need to apply for tax deductions, and it will save you the headache of searching in the future.
If you are a new homeowner or are looking to purchase real estate, Landmark Title can help you with all your title and escrow needs. Contact us to have a knowledgeable member of our team answer any questions you may have about the escrow process.