Homeownership is a significant life goal for many people. It’s exciting to be able to paint your walls, renovate your bathroom, and start building equity in a space that’s all your own.
Tax season is upon us, and if you are a homeowner then you have some extra decisions coming up. The good news is that homeowners qualify for additional tax breaks because different expenses, like mortgage interest and property taxes, can be deducted.
Here’s what you need to know about preparing your taxes as a homeowner.
Know your deductions
There are basically two ways to deduct expenses as a homeowner — a standard deduction or an itemized deduction. The standard deduction gives you one flat rate that you can deduct from your taxable income. It requires a lot less documentation than the itemized deduction and is therefore less work to complete. However, you might be missing out on the amount of money you can deduct with the standard deduction since it’s the same across the board.
For some homeowners, the best way to maximize your deduction is to take the itemized deduction. In this choice, you prepare an itemized list of all your homeownership-related expenses and document them in your tax forms.
This option can lead to a greater deduction than the standard deduction, but not always. It depends on many factors, such as your income and how much mortgage interest you’ve paid for your home.
Choosing to take the itemized deduction requires a lot of preparation and work to make sure that all of your expenses qualify for a deduction and that you have the correct documentation. This is why some chose to simply take the standard deduction.
Since tax laws can be complicated, the best way to know which route you should take when claiming a deduction is to talk to a tax professional.
Whether you want to take the standard deduction or the itemized deduction, it’s important to stay organized and keep track of your home-related expenses for taxes.
Here are some tips for staying organized:
- Start early. It’s never too soon to begin preparing your documents.
- Use a file folder to organize your documents. Try organizing them by month.
- Take pictures of important documents in case you lose them.
- Keep track of any receipts and bills that have to do with homeownership.
If you sold or bought your home in 2019, it’s important to obtain your Closing Disclosures for your taxes. If you don’t have it, you can contact your REALTOR to obtain it.
Work with a professional
Even with the best preparation and organization, taxes can still be confusing. If you’re not confident in your ability to file your taxes correctly, it may be worth it to hire a professional.
An experienced accountant can help take the stress out of filing taxes and can help you maximize your deductions. Many find that the price of hiring an accountant is well worth it in the end.
There are several ways that you can find a trustworthy accountant to help you with your taxes. Tap into your social network and ask your friends and family for recommendations. The most important thing to research is what licenses and how many years of experience they have. Ideally, your accountant will specialize in taxes.
Start with Steinborn
Our team at Steinborn is knowledgeable and passionate about homeownership. We work hard to make sure that you understand that buying or selling your home can affect your taxes, which is just one of the many reasons that Steinborn is the first choice for real estate in Las Cruces.