The importance of good record keeping and understanding the tax code can be a huge benefit to you and your bottom line. You need to be completely aware of how owning a home can help your tax situation, and with a little planning and organization on your part, you’ll be prepared for preparing your taxes!
For a detailed list of all IRS Tax Forms, click here.
Form 1040 Schedule A is the place to itemize your deductions so that you can take advantage of tax benefits.
Form 1098 is the place where you can deduct home mortgage interest payments from your taxable income. This includes the portion of your loan installment payments that are attributable to interest, your mortgage insurance premiums, and any other fees you paid to secure your mortgage loan, such as loan origination fees.
Your mortgage loan originator is required to send you IRS Form 1098 after the end of each tax year if you paid more than $600 in mortgage interest. Form 1098 lists exactly how much mortgage interest you paid during the tax year and can be used to calculate your deduction.
Form 8829 is the form that you use for a home office deduction. NOTE: You can use this form ONLY if you use a certain area of your home exclusively for your work. This deduction is different for everyone and corresponds to the size of your office or workspace compared to the total square footage of your home.
Home Office deductible expenses include mortgage principal and interest, improvements, repairs, insurance, property taxes, utilities, and maintenance expenses. Additionally, you can deduct 100 percent of expenses incurred only because of your office — expenses for a dedicated phone line, for example.
NOTE: You must file Form 8829 in addition to Form 1040.
NOTE: The IRS looks at this deduction closely, so do not be tempted to falsify information.
Property Tax Records
State and local real estate taxes which can be substantial in Atlanta are also (in general) deductible.
Schedule A is for deducting any losses you may have incurred to your home. It can include not only your home but any household items due to theft, disaster, or unexpected destructive events, such as hurricanes.
Keep copies of all correspondence with your insurance company and all third-party appraisals of your losses. Although IRS valuation rules are complex, you are generally entitled to deduct the fair market value of any property you lost, and the diminution in fair market value of any damaged property.
NOTE: If these losses are covered by insurance, you must file a timely claim.
NOTE: You cannot claim any losses that your insurance company reimburses you for.
For more information, you can also check out Publication 520…the downloadable Guide, Tax Information for Homeowners.
Should you have any questions about home ownership and general tax questions, Sarah and Lisa would love to help. Please contact them today and on behalf of the entire team at Chatel Group, Happy New Year!