Preparing for Income Taxes – Florida Homeowner Tips
You’ve probably heard a lot about tax reform and the bill that was signed by the President. Those changes apply to the 2018 tax year, which you will file next January. For this January-April, you will be filing 2017 taxes. It’s important, when preparing for income taxes, to gather certain documents related to home ownership. Here are a few to remember.
Mortgage Closing Disclosure
If you purchased or refinanced a home in 2017, you should have received a closing disclosure statement. This document details your closing costs, pre-paid expenses, etc. Give this to your tax preparer as some of the charges listed may be tax deductible.
Your mortgage company will send you a 1098 form that summarizes what you paid for mortgage interest, mortgage insurance, and property taxes. This is one of the most important forms that you will need when preparing for income taxes. Some folks pre-paid property taxes for 2018, thinking that it could be deducted in 2017 tax returns. Unfortunately, the federal government clarified that only property taxes invoiced in 2017 can be deductible for that year.
Home Repairs & Improvements
In general, you cannot deduct home repair and home improvement expenses for primary residences. However, you should still gather this information and record the total for the year. This will be needed to calculate your net earnings when you go to sell in the future. Given that the amount of tax-free earnings from home sales will be reduced beginning in 2018, those additional home expenses may help you save money on capital gains taxes in the future.
Solar Powered Home Systems
Although you cannot deduct home improvements, you may qualify for Residential Energy Improvement Tax Credit if you installed solar powered systems. Unlike other energy improvement credits that were offered in the past, there is no limit to the credit for solar powered systems. Additionally, if this credit ends up being more than the taxes that you owe, then you can carry forward the remainder into future tax years.
Casualty losses refer to damages to your home. This may result from fires, flooding, vandalism, and theft, just to name a few examples. If your homeowner’s insurance company does not reimburse you for the full amount of your losses, you may be able to deduct the difference. You will need to have documentation on the amount of your losses and insurance proceeds received.
More on Preparing for Income Taxes
As a general rule, it’s a good idea to keep track of all financials related to your home as a way of preparing for income taxes. From mortgages to insurance, taxes, and home repairs, this information will be used in either your current tax return or possibly future tax returns. Good documentation is the best way to take full advantage of any available tax advantages of home ownership.