Everybody’s favorite time of year is here: tax season! Now that you’re a homeowner, things are about to get a lot more interesting. It can be challenging to muddle through the various deductions and accounting jargon, so we’ve taken the liberty of featuring a few tips to help you navigate the process.
- Cut your losses. Considering the endless snow and the multitude of problems it has caused, this is all the more relevant. If you have an out-of-pocket loss that’s more than 10% of your income, you’re eligible for a deduction. But remember, this rule does not apply to losses covered by your insurance.
- Track your expenses. Keep a separate folder with receipts, invoices and any other miscellaneous documentation related to home improvements. This is especially true if you bought a fixer upper. It also applies to home offices.
- One and done. By this point, you’re probably well aware of the energy tax credit available to you should you install a solar water heater or energy efficient windows. What you might not be aware of, however, is that this credit is a lifetime credit. Once you claim the credit up to $500, you can’t claim it on any subsequent years.
- Itemize. If you haven’t done this in previous years, this complicated step will be a big change for you. Itemized deductions can be anything from mortgage interest and property taxes to charitable contributions.
- Nondeductible knowledge. Just as important as knowing the items that can be deducted is knowing the items that can’t. Home ownership association fees and assessments that increase the value of your neighborhood are a few examples.