Are you a tax-savvy homeowner?
By Erik J. Martin CTW Features
T
he turn of the calendar year may have come and gone, but it’s never too early to make a New Year’s resolution – especially one that and save you money. And if you own a home, you may be leaving money on the table that you could otherwise deduct from your taxes. That’s why it pays to understand every tax write-off you’re eligible for and start keeping good records that can substantiate whatever you claim on your tax return. “It’s always helpful to make sure you are maximizing specific tax benefits. Every situation is different, but often there are options to consider prior to year-end, after which it’s too late,” says Jessica Distel, director of Business Services for Buckingham Advisors in Westerville, Ohio. March 19, 2021
three years ago, most homeowners – especially married couples – don’t get as many federal tax important for taxpayers In other words, the benefits as in the past for and home-based business homeownership,” Gamdeadline has probably owners who follow cash passed to plan for writeburg adds. “For instance, offs, deductions, and cred- basis accounting, which deductibility of the its that you can claim on recognizes expenses and home mortgage interest your 2020 tax return due revenues at the time cash expense was reduced on to the IRS this April. But is paid out or received. new mortgages with a $1 “Being a cash basis there’s plenty of time left million mortgage balance in this new year to scheme taxpayer essentially means to $750,000. And the real that any possible tax-sav- estate tax deduction is for tax savings you’re eliing actions would have to now limited to $10,000, gible to claim in 2021. be done by December 31, which includes state and “It’s important to 2021,” says Blake. review your eligible tax local taxes. This, coupled According to Distel, the with the fact that the deductions in advance of the April 15, 2022 tax good news is that eligible standard deduction is now homeowners may still be set at $24,800 for married deadline to make sure able to deduct amounts you are not missing any couples filing jointly, most deductions you are legally paid this year for real married taxpayers need estate taxes, loan points, entitled to and to avoid their mortgage interest mortgage interest, mortany surprises with an expense and charitable increased tax bill,” explains gage insurance premiums, deductions to exceed New York City-based tax and IRS-approved chari$14,800 to receive any table causes. accountant Ariel Gamfederal tax benefits.” The bad news? The Tax burg. Blake notes that these Cuts and Jobs Act (TCJA) changes have caused many John Blake, a partof 2017 somewhat limit taxpayers to switch from ner with Klatzkin, a your ability to maximize itemizing deductions Hamilton, New Jerseyto taking the standard headquartered accounting tax deductions. deduction, especially those “With the changes to and advisory firm, says this strategy is particularly the tax code taking effect individuals who have been
Maximize your tax write-offs by following these tips
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affected by the TCJA. Unfortunately, salaried employees who have been forced to work from home due to the coronavirus aren’t eligible for any special deductions. “However, you can ask your employer to reimburse certain expenses incurred for working from home, possibly, for instance, higher utility bills; generally, these reimbursements are not taxable income to you,” says Gamburg. If you are working from home for yourself as a sole proprietor or small business owner, you can also still claim a home office deduction if proper conditions are met. “If you have a homebased business and use a portion of your house exclusively for that business, you can deduct a portion of house-related expenses against your business,” Blake says. Say your home office comprises 10 percent of
the square footage inside your home. In this case, you may be able to deduct 10 percent of many of your home’s expenses with careful record-keeping. “Some of the costs that you are allowed to deduct include a portion of real estate taxes, a portion of mortgage interest, a portion of homeowners insurance, a portion of utilities, and other expenses that may directly impact the office space. Even to some extent, home improvements that are done to the house’s overall exterior could be subject to a possible deduction,” adds Blake. Again, for best results, start early and think forward. “One of the best ways to maximize your tax deductions is to plan ahead for itemized deductions so that you can spend more on needed expenses in a specific year, which can then generate a higher deduction,” says George Birrell, a CPA and founder of TaxHub in New York City. You can also hold off on certain expenses until you decide you want to itemize for a given year, thereby maximizing the value of that deduction.” Lastly, think about recruiting an expert who can help you plan for and claim every tax write-off you qualify for. “Getting sound tax and accounting advice from an experienced accountant or tax planner can yield great benefits,” Distel suggests. 5
