BUYING A HOME AND TAXES: WHAT YOU SHOULD KNOWSeptember 17, 2020 | By Chuck
It’s a New Year! And for many that means resolutions,fitness, and starting new activities, but for a lot of us, that means it is time to get your information ready to do your taxes. If you have just bought a home, you may have heard that a home is a great tax deduction! And it can be,depending on eligibility.
Most states have a sales tax. In Florida this tax is applicable to each sale, admission, storage, or rental in unless the transaction is exempt. Sales tax is added to the price of taxable goods or services and collected from the purchaser at the time of sale. In Florida, sales tax is not applied to home purchases, but you will pay Property Taxes and Stamp Taxes, also known as Doc Stamps, to the State/County, recording fees, and title fees.
The good news for homeowners is that there are a variety of deductions available. Not all homeowners will qualify for these deductions, so be sure to talk with a tax professional about eligibility and what you can claim. But for eligible homeowners who file itemized deductions. Below is a list of some potential deductions.
Mortgage Interest Deduction, a common itemized deduction that allows homeowners to deduct the interest they pay on any loan used to build,purchase, or make improvements upon their residence, from taxable income.
State and Local Property Tax Deduction is limited to a combined total deduction of $10,000 ($5,000 if married filing separately).
Mortgage Interest Credit, available to individuals that received a Mortgage Credit Certificate (MCC) during the tax year from the state or local government. If the amount of interest paid is more than the amount of the credit calculated on Form 8396, you can claim an itemized deduction for the remaining amount.
State and Local Tax Breaks States, counties and municipalities may offer tax breaks that can help lessen the cost of property taxes. Eligibility can be based on factors such as income, whether you’re a veteran or a disabled veteran, where you live in the state, or whether you’re retired or disabled.
Energy Efficient Upgrades Depending on the repair or upgrade, some of these upgrades may qualify for a tax deduction, such as replacing insulation, installing energy efficient windows, appliances, etc.
Deductions for “Aging in Place” In addition to upgrades to make your home more energy efficient, upgrades that are made to allow a homeowner to “age in place” or stay in their home as they get older may also qualify for deductions. Some of these modifications may include installing wheelchair ramps, handlebars in the shower, and other features that improve accessibility.
Home Office Deductions This deduction can be a bit tricky to access, it is highly recommended to talk with a tax professional before claiming a home office deduction, but this deduction would allow you to claim your home office space as a work expense and deduct it from your taxes.
Tax Benefits from Selling Selling a home can have a significant impact on your tax liability to Uncle Sam. Depending on how long you have owned your home,and if you have used the house as your primary residence, there may also be a credit available when you sell the home. Often this credit will balance out the capital gains tax. Your accountant or CPA may want your closing statement as they may be able to obtain deductions from it, so keep it close for when it is needed. If you lose it,simply call and Chuck will get them a copy.
Disclosure: Chuck Shaver is not a CPA or an accountant and has no financial training. Individuals should verify all information with their accountant or CPA