April 15th seems a long way off, but it will be here before you know it.
Now is the perfect time to start getting your paperwork in order.
Owning real estate can make a big difference on your tax return, so make sure that you’re taking advantage of all the deductions you’re entitled to.
We’ve outlined a few below:
Unless you paid cash for your purchase, you probably took out a loan to buy your Boulder home.
Mortgage interest is one of the best tax deductions available, so be sure to hang on to that 1098 Mortgage Interest Statement from your lender.
You can almost always deduct the entire amount of interest paid per calendar year.
Real Estate Taxes
Depending on where your property is located, you are likely paying real estate tax, either to the state or to a local governing authority.
Taxes based on property value are generally deductible as well. You may have an escrow account to hold these funds during the year, so be sure that you only deduct the amount of taxes you actually paid.
Home Equity Line of Credit
You may deduct home equity line of credit (HELOC) debt interest as long as you are legally liable to pay the interest, the interest is paid in the tax year, and the debt is secured by your home.
The home equity debt has a limit of up to $100,000 ($50,000 if married filing separately).
Mortgage Insurance Premiums
Depending on how your loan is structured, you may have mortgage insurance. With the recently passed American Tax Relief Act of 2012, all mortgage insurance premiums are tax deductible for the 2012 and 2013 tax year. There are some qualifications, so check with your tax advisor.
Mortgage Interest on Land
If you purchased land with the intent to build, the interest you have paid may qualify as deductible mortgage interest as long as the structure becomes your qualified residence within a 24-month period.
This deductibility of bare land mortgage interest is a tricky one. You can see the IRS explanation here.
Your home could be one of your greatest resources for reducing your tax liability. Most times these deductions are itemized on a Schedule A (Form 1040) when you prepare your taxes.
A great next step is to call a qualified tax planning professional. Please feel free to contact us if you would like a referral.
There was plenty of discussion and debate leading up to the New Year’s looming “fiscal cliff”. Ultimately, the event was avoided, but not before legislation was passed which may benefit homeowners in Broomfield and nationwide.
If you have yet to file your 2012 taxes, take a minute to review the tax limitations and credit extensions, which Congress passed through the HR 8 legislation. You’ll want to ensure you’re paying the proper tax bill come April 15.
Of course, every individual’s tax situation is unique. Review your allowable deductions and credits with your tax preparer.
The tax credit for homeowners to receive a ten percent deduction, up to $500, for energy efficient improvements to homes is extended for 2013.
Individual estates valued at up to five million dollars and family estates valued at up to ten million are now exempt from estate tax. After those cutoffs, the rate is 40 percent, which is up from 35 percent.
Mortgage Forgiveness Debt Relief Act
This act was also extended through 2013. It means that debt reduced through mortgage restructuring or debt forgiven in the case of a foreclosure may not be taxable.
Mortgage Insurance Premiums
This deduction for those making under $110,000 is extended through 2013. This deduction is also available retroactive for 2012. Mortgage insurance premiums paid as part of a conventional or FHA mortgage are eligible, as are premiums paid to the USDA.
These limitations that reduced the value of itemized deductions are permanently repealed for most taxpayers. However, they will be re-instituted for individuals making over $250,000, and for married couples making over $300,000 and filing jointly.
As a homeowner, you get access to special tax breaks which are unavailable to renters throughout Colorado and the country. Don’t leave tax dollars on the table. Speak with your accountant to see what claims you may make.
The deadline for filing 2012 federal tax returns is Monday, April 15, 2013.
The typical U.S. taxpayer will receive roughly $3,000 in federal income tax refunds this year — an average of $250 per month. So, what would you do with an extra $250 monthly? This segment from NBC’s The Today Show offers some advice.
Whether you’ve already filed your annual taxes for 2011, filed an extension, or will squeak by on the deadline, you could probably be doing more with your taxes. The above video shares some tips. It’s four minutes of solid insight on tax refunds, tax withholdings, and reducing your household’s overall “bad debt”. There’s something for everyone.
Among the points covered in the tax refund piece :
- Consider changing your personal payroll exemptions so your 2012 refund is $0
- Remember that refunds are not “free money” — it’s your money. Spend wisely.
- Use your tax refund to fund retirement accounts
Advice is also shared about how to use your tax refund to fund a reserve account, or emergency fund. As a homeowner or home buyer in Boulder , applying tax refunds to a savings accounts in this manner can go a long way. When you’re a homeowner, maintenance costs can be sudden and unexpected. A furnace can explode, for example; or, a roof could spring a leak. Having money set aside for crisis is essential.
Having a savings account will also improve your household’s long-term financial stability.
As a reminder, in most years, federal income tax is due April 15. However, with Tax Day falling on a Sunday and with the federal government closed for a holiday the following Monday, U.S. taxpayers in Colorado and nationwide get a reprieve until Tuesday, April 17, 2012.
Traditionally, federal income taxes must be filed with the IRS on, or before, April 15 each year. The date has become such a part of U.S. culture that many people simply call it “Tax Day”.
This year, however, for the 3rd time in 7 years, your federal income taxes will not be due April 15. Instead, because of a combination of the calendar, a holiday, and tax law, Tax Day 2012 is delayed until Tuesday, April 17.
You will have two extra days to prepare and file your federal income taxes this year.
First, April 15 is a Sunday and all federal offices are closed on Sundays. This means that that taxes can’t be filed on April 15, as regularly scheduled. Rather, the tax due date should roll over to the first available business day — Monday.
However, Monday, April 16 is Emancipation Day, a holiday in the District of Columbia since 2005.
Emancipation Day honors President Abraham Lincoln’s April 16, 1862 signing of the Compensation Emancipation Act. All of Washington, D.C. is closed for the local holiday — including the offices of the IRS. Taxes can’t be due on this date because there will be nobody at the Internal Revenue Service to receive them.
Therefore, Tax Day rolls over to the next available business day, and that’s Tuesday, April 17. Despite the 2-day change, as a reminder, the deadline to file a federal tax return with extension has not changed. That filing date remains October 15, 2012.
Also, note that most states have chosen to mirror the IRS’ tax deadlines this year even though Emancipation Day is a Washington, D.C-specific. Be sure to check with your accountant to confirm your local filing deadline.
Time is running out to boost to your 2011 federal tax refund. All you have to do is make your January 2012 mortgage payment while it’s still December.
It’s a simple tax strategy that works because of how mortgage interest is paid, and of how the U.S. tax code is written.
Different from rent which is paid for the month ahead (i.e. “you’re paying January’s rent”), mortgage payments are made only after mortgage interest has accrued (i.e. “you’re paying for money you’ve already borrowed from the bank”).
This is called “paying interest in arrears” and U.S. tax code states that the mortgage interest is tax-deductible in its year paid, subject to limitations.
By making the January 2012 mortgage payment in December 2011, therefore, homeowners who itemize their on their tax returns can apply their January mortgage payment’s interest portion to their 2011’s tax returns.
The alternative is to pay the mortgage on schedule, and wait for April 15, 2013 to claim the credit.
If you choose to pre-pay your mortgage and typically send your payment via USPS, give your check ample time to be delivered to your lender, and processed. Mail your check no later than Saturday, December 24.
For Broomfield homeowners that pay electronically, the process is simpler. Edit your online bill pay program to have your mortgage payment post no later than Thursday, December 29.
Make note, however. Not all mortgage interest is eligible for tax-deductibility, and not all homeowners throughout the state of Colorado who pay mortgage interest should itemize said interest on their tax returns.
Before prepaying on your mortgage, ask your tax professional for advice.
If you’re an eligible federal employee or qualified military personnel, you have 3 weeks from this Saturday to use the federal home buyer tax credit, and to claim up to $8,000 in federal income tax credits.
According to the IRS, eligible persons include members and spouses of the uniformed services, members and spouses of the Foreign Service, and intelligence community employees who served at least 90 days of qualified, extended duty service outside of the United States between January 1, 2009 and April 30, 2010, and their spouses.
Eligible persons must be under contract for a new home on or before April 30, 2011, with the home’s closing occurring on or before June 30, 2011.
The federal home buyer tax credit is a true credit, too. Eligible buyers receive a dollar-for-dollar tax reduction equal to 10 percent of the subject home’s purchase price, not to exceed $8,000 for first-time home buyers, and not to exceed $6,500 for repeat home buyers.
Repeat buyers must have lived in their “main home” through 5 of the last 8 years in order to be eligibke.
Furthermore, both the buyer(s) and the subject property must meet certain minimum eligibility requirements:
- The home may not be purchased from a parent, spouse, or child
- The home may not be purchased from an entity in which the seller is a majority owner
- The home may not be acquired by gift or inheritance
- The home sale price may not exceed $800,000
- Buyers may not earn more than $125,000 as single-filers; $225,000 as joint-filers
The complete program description is published on the IRS website.
For additional information regarding your tax credit eligibility, you may want to speak with an accountant or other tax professional. It’s often worth the cost.