Tax Time Real Estate Deductions!

Hello Hampton Roads Home Owners, 

As tax time approaches, it's essential to explore every avenue to maximize your deductions and potentially save some money. If you itemize your deductions, these costs could translate into valuable tax savings. 

Before we delve into what you need to know, it's important to clarify that while real estate agents and settlement attorneys are experts in their respective fields, they are not tax specialists. Every homeowner's situation is unique, and tax laws can be complex. Therefore, seeking advice from a certified public accountant (CPA) is highly recommended to ensure you're making informed decisions tailored to your specific circumstances.

Now, let's talk about those deductions!

Mortgage Interest: This is often the largest deductible closing cost for homeowners. The interest you pay on your mortgage is typically tax-deductible, provided certain conditions are met. Keep track of your mortgage interest statements throughout the year, as they will be crucial come tax time.

Points or Loan Origination Fees: If you paid points to obtain a mortgage or refinance your home, these expenses might be deductible. Points are prepaid interest, and the IRS allows you to deduct them over the life of the loan.

Property Taxes: The property taxes you pay on your home are generally deductible as well. You may have prepaid property taxes at closing, which can be included in your deduction for the year. It's important to note that state and local real estate taxes are subject to a limit of $10,000 if married filing jointly, and up to $5,000 if married filing separately. This limitation was introduced to the tax code in recent years and may impact the amount of real estate taxes you can deduct.

Home Equity Loan Interest: If you took out a home equity loan and used the funds for a home improvement, then you could deduct the loan interest. If the money was used for any other purpose then this deduction would not be allowed.

Home Office Expenses: If you use a portion of your home exclusively for business purposes, you may be eligible to deduct related expenses, such as a percentage of your utilities, insurance, and maintenance costs.

Here's a list of expenses that are not deductible:

• Flood Insurance
• Fire Insurance 
• Home Owner's Insurance
• Down payment
• Domestic Service
• The principal amount of your mortgage
• Utilities (except for home office as mentioned above)

Remember, the key to maximizing your deductions is proper record-keeping and understanding the eligibility criteria for each expense. Keep all relevant documents, receipts, and statements organized and readily accessible. And, always consult with a tax professional before making any decisions that could impact your finances.

There you have it--May your tax deductions be large and your tax bill small!

Thanks for Reading,

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