Expert Tax Tips to Help New Homeowners Save Money and Succefully Navigate Tax Season
New year, new home, new (and this one’s considerably less exciting) taxes. Our experts have advised an array of professionals, from title companies to realtors, real estate attorneys, and managers of lenders, on pretty much every step of the process leading up to the purchase of a home. That being said, there isn’t nearly enough content out there specifically meant to help buyers navigate what happens after they buy their first home.
As we dive (however reluctantly) right into tax season, it’s critical for homeowners to know what’s in store for them – and to be equipped with the tools they need to navigate it successfully. Becoming a homeowner ushers in a host of new things – and that includes a new relationship to taxes. To get the information you need to know before filing for taxes this year, keep on reading.
Learn About – and File for – Homestead Exemption
If the home you’ve recently purchased is your permanent residence, it’s likely that you’ll be able to file for homestead exemption. This means a deduction of up to $50,000 from your home’s taxable value. This exemption is not applicable to any investment or rental properties you may own; only your real, permanent home.
Find What Deductions and Exemptions You Qualify for and Apply for Them
An exemption reduces the amount of your home’s value that is taxed, while a deduction is an amount subtracted from your taxes based on expenses you’ve had over the last year. Deductions come in two categories, standard and itemized, and you can only choose one type to be applied to your property taxes.
Tips for Navigating Exemptions
Some exemptions you may qualify for include homestead exemptions; exemptions for low-income seniors; the value of added construction that’s been done to accommodate elderly family members, veterans, or spouses of first responders who have passed away. The best way to determine whether you qualify for an exemption is to get in contact with your tax appraiser’s office directly.
Tips for Navigating Deductions
The first important decision you’ll have to make is determining whether to go with standard or itemized deductions on your property taxes. This will depend on an array of factors, including the expenses you’ve incurred fixing up your house; whether or not you utilize your home for work; and your mortgage interest rate, among other things.
Many homeowners opt for standard deductions, which currently total $12,400 for individuals and $24,800 for married couples because in many cases they’re better off doing so than itemizing their tax-deductible expenses.
In order to determine whether itemized deductions are a better option for you, it’s critical to remain as organized as possible year-round. One option that you can use in conjunction with your tax deductions is to claim tax credits, which are reductions taken directly from the amount of tax you owe on your home. Keep receipts and records of every expense you have that’s related to home improvement or upkeep. Understand which of these expenses are tax-deductible, including:
- Deductions for a home office if a room or any part of your home is used regularly for work
- Home improvement expenses are often tax-deductible for the year when they occur.
- Mortgage interest deductions, as well as deductions for loans used for home improvement, are also possible.
There’s no denying that navigating tax season as a homeowner can be stressful, but keeping detailed records of your home-related expenses is the first step to making sure you get your money’s worth throughout tax season. Though the Tax Cuts and Jobs Act of 2017 reduced a significant amount of deductions for which homeowners could be eligible, there are still plenty of options available to you if you know where to look.
Know Your Lender
One of the parts of homeownership that’s rarely talked about enough is the possibility that your mortgage be switched over to another lender. It can be easy to get lost under piles of junk mail (more on that later), but it’s critical to stay attentive to any correspondence from your lender. They’re required to notify you upon a mortgage transfer, and this information will also be filed along with your deed and mortgage in the county clerk records. It’s a good idea to make a habit out of checking in on this annually before tax season to make sure you’re on top of your loan.
Ignore the Junk Mail
New homeowners are prime targets for companies offering all sorts of unnecessary “features,” “benefits,” and “exclusive offers.” Though they’ll claim to make your homeownership experience easier, cheaper, or generally better, they’re not to be taken seriously. The only mail-in notices and offers you should pay attention to when it comes to your home are the ones that arrive from an entity that’s already involved with your home or mortgage. Other companies are, quite simply, just trying to make a sale.
Tax season is never easy, especially when you’re a new homeowner. However, there is so much you can do to make sure that you make the best out of your first tax season while owning a home. By understanding what you can do – and claim – you’ll be better equipped than ever to navigate tax season successfully.