Owning a home can be extremely challenging at times. One of your biggest investments is the home you own and consequently, the taxes associated may be your biggest expense. Property, income, and estate taxes are all part of owning a house and can be worrisome to many owners. Understanding the rules and exceptions to the rules is important because you want to keep, and maximize your potential tax benefits. Here are a few helpful tax tips to consider in order to help you, the homeowner, potentially reduce some of your most taxing areas.
First, it’s important that you review (and question) your real estate tax bill, as this may lead to a reduction on your property tax expense. Assessment information is available online, or you can ask your trusted advisor for help to create an appeal if your real estate tax bill is out of sorts. There are certain areas in which you may be taxed, but your status qualifies you for certain exemptions on those areas.
Next, you’ll want to note that based on the location of your home, there are certain incentives for renewables and efficiency improvements. A tax credit of up to $500 (10% of costs) may be available to reward homeowners for going green. Putting in new windows, lights, or insulation are just a few ways to potentially reap the tax rewards. Switching to solar, wind, or geothermal energy sources gives you the opportunity for a federal tax credit as well.
Lastly, be sure to keep track of your remodeling costs, and save receipts on certain capital improvements such as a new roof or the installation of a new sprinkler system. These improvements add to your adjusted cost basis, which can save you capital gains taxes in the long run. And, when it comes time to sell your home, your ability to use the singles/couples capital gains exclusion will depend on the mindful tracking of remodeling and home improvement costs.
For many of us, our home is the single biggest investment and thus, we should treat it like one. On average, we give a third of every dollar we make in taxes, and a lot of it is related to your home. CLICK HERE to request your no obligation financial review and we’ll talk about the ways in which we can help minimize your overall tax bill in retirement.