2020 is about to end which means only one thing, tax season is right around the corner! Soon, it will be time to prepare your 2020 tax returns and it only helps to be ready. Getting prepared early can save you a few things – time, stress, and potentially money (who doesn’t love to save money?!) Being prepared is especially important if you’ve faced major changes throughout the year such as buying a home.
Here are a few tips that can help you take advantage of your available homeowner tax breaks when filing this year.
Consider a Mortgage Interest Deductions
Depending on your loan term and interest rate, you might be paying hundreds of dollars every month in interest. If you break down a list of your expenses, some of them may be deductible. It’s important to remember that if you take a mortgage interest deduction, you don’t get to take the standard deduction from the IRS.
Track Home Office Expenses
This year, working from home is more popular than ever. If you’re self-employed or your job requires you to work from home, you may be able to save money on your tax bill. The space that you’re using as your office needs to be primarily used as an office to be considered as a deductible. The way you figure tour deductions out can vary from person to person. Some like to use the actual expense method. This includes deducting expenses that come with the office like, electricity, mortgage payment and home repairs.
However, others have found that the simplified version is the better choice. The homeowner is allowed a deduction of $5 for every square foot of the office space. Note that this is used for offices under 300-square-feet.
Don’t go without tax savings because of disorganization. The last thing you want to be doing is scrambling to find a receipt to qualify for a deduction or tax credit and not be able to find it. We recommend keeping everything that relates to your taxes organized and placed in a safe location. Designate a tax file, get a lockbox or dedicate a drawer for everything tax related.
Repairs and Home Improvements
Remember that big repair bill you paid in May? You might be able to deduct it. Repairs and home improvements may be able to be deducted off your taxes. However, you have to track those repairs. Think back to the beginning of the year and note any improvements or repairs you invested in. Make sure you have the receipts and take them to your CPA when you go to file.
Whether you’re a new homeowner or a seasoned homeowner, these are great tips to take into consideration when you file your taxes. Small items like this can add up to a lot of money left on the table. For your new year’s resolution – make it a point to keep your receipts, expenses and documents more organized to make your taxes easier to file. You’ll be glad you did!
From our family at Mid America Mortgage to you and your family, have a safe and prosperous 2021.