{"id":884,"date":"2020-06-01T06:20:59","date_gmt":"2020-06-01T10:20:59","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=884"},"modified":"2024-04-25T23:20:31","modified_gmt":"2024-04-26T03:20:31","slug":"real-estate-taxes-tips-and-updates","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/real-estate-taxes-tips-and-updates\/","title":{"rendered":"Real Estate Taxes: Tips and Updates"},"content":{"rendered":"\n<div class=\"wp-block-image\"><figure class=\"alignright is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2020\/06\/real-estate-taxes-1024x684.jpg\" alt=\"Image of a smart phone being used as a calculator to factor real estate taxes.\" class=\"wp-image-885\" width=\"512\" height=\"342\" srcset=\"https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2020\/06\/real-estate-taxes-1024x684.jpg 1024w, https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2020\/06\/real-estate-taxes-300x200.jpg 300w, https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2020\/06\/real-estate-taxes-768x513.jpg 768w\" sizes=\"auto, (max-width: 512px) 100vw, 512px\" \/><\/figure><\/div>\n\n\n\n<p>The new deadline for filing last year\u2019s taxes is Wednesday,\nJuly 15, 2020. Time to review the current tax implications of owning a home. <\/p>\n\n\n\n<p>First, we need to itemize homeowner deductions if we decide to\nclaim them on our federal returns. There are a number of deductions available,\nbut if you\u2019re like most homeowners, you won\u2019t itemize and claim them. This is\nbecause the IRS standard deduction is quite high since the Tax Cuts and Jobs\nAct of 2017. The standard deduction that applies to the 2019 tax year is\n$24,400 for married partners filing jointly, $12,200 for single and married people\nfiling separately, and $18,350 for single heads of households. <\/p>\n\n\n\n<p>Most people prepare an itemized worksheet at least for their\nown knowledge \u2014 if only to compare the standard deduction against the itemized\ntotal before deciding how to file, or to show their accountants the\nexpenditures. So, here are some major deductions of note at the current time. <\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\">Real Estate Taxes<\/h2>\n\n\n\n<p>There\u2019s a field on Schedule A to deduct property taxes\nyou\u2019ve paid last year as a homeowner. Local tax authorities assess real estate\ntax \u2014 property tax, in everyday conversation \u2014 according to your home\u2019s location\nand school district. Substantial renovations, such as additions that require\npermit applications, are often noted by local officials and raise the appraised\nvalue of a home.<\/p>\n\n\n\n<p>A home is taxed on its assessed value, which should be lower\nthan fair-market value. You\u2019ll receive statements, and can also contact the\nlocal tax authority for the precise amount. A homeowner can pay these tax bills\nwith the tax collector directly; yet for many people, these taxes are taken automatically,\nfrom a mortgage escrow account. <\/p>\n\n\n\n<p><strong><em>Note:<\/em><\/strong> In 2017, <a href=\"https:\/\/money.usnews.com\/money\/blogs\/my-money\/articles\/2018-03-30\/how-tax-reform-impacts-homeowners\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">federal law capped the formerly unlimited local and state deductions at $10,000<\/a> ($5K if you\u2019re a married partner filing separately). This limit is for property taxes combined with state and local income and sales tax.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Homestead\nExemption<\/h2>\n\n\n\n<p>In most states, homeowners receive a form with simple\ninstructions on applying for the homestead tax exemption, and the deadline for\ngetting the form in to get credit for the year. This allows homeowners to\nshelter a portion of their primary home&#8217;s value from the property tax\ncalculation. This is part of the states\u2019 protection of homeowners from steep\nlocal taxes. Some states offer the exemption across the board; others offer\nbreak to particular groups such as veterans, seniors, and people with\ndisabilities. <\/p>\n\n\n\n<p>Your exemption, once issued, stays in place as long as you\nlive in the home. The local tax assessor should apply the exemption for your\nhome annually, until you move, or you or a co-owner pass away. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Mortgage Interest<\/h2>\n\n\n\n<p>Most people won\u2019t itemize, so they won\u2019t claim mortgage\ninterest. But if you recently bought a home, the amortization schedule involves\npaying a lot of interest early on, so this item could be substantial.<\/p>\n\n\n\n<p>Your mortgage company should have sent you an interest statement\nearly this year, showing what you paid in 2019. Within specified restrictions,\nmortgage insurance premiums count, along with your mortgage interest and private\nmortgage insurance (PMI), for deductions on Schedule A, in light of the\nMortgage Insurance Tax Deduction Act of 2019 (the \u201cSecure Act\u201d). This tax break\nis not only good for 2019, but retroactive to 2018 \u2014 so, some people will\nbenefit from an amended 2018 tax return. <\/p>\n\n\n\n<p><strong><em>Note 1:<\/em><\/strong> You can deduct interest on home equity loans and home equity lines of credit (HELOC), subject to a cap on the amount you pay in interest on combined this loan combined with your mortgage loan.&nbsp; &nbsp;HELOC interest is deductible if you took out the loan to buy or renovate a home. The HELOC\u2019s average interest rate is much lower than credit card interest. Expect applying for a HELOC to <a href=\"https:\/\/www.bankrate.com\/mortgages\/home-equity\/coronavirus-impacting-helocs\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">get a lot harder<\/a> during and after 2020. <\/p>\n\n\n\n<p><strong><em>Note 2:<\/em><\/strong> Did you buy down your mortgage rate at closing? You may be able to <a href=\"https:\/\/www.irs.gov\/taxtopics\/tc504\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">deduct&nbsp;those discount points<\/a> on Schedule A.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Updates to the Home Office Deduction<\/h2>\n\n\n\n<p>You may deduct home office expenses including the use of areas in your home for work and for business-related storage, if you\u2019re self-employed and use part of your home<em> exclusively<\/em> for your business. What if you\u2019re home because of health-related <a rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\" href=\"https:\/\/www.journalofaccountancy.com\/issues\/2020\/may\/deduct-home-office-expenses-coronavirus-remote-work.html\" target=\"_blank\">work-from-home mandates<\/a>? When 2020 taxes come due, can you deduct home office space for the time you worked at home? Probably not. Consult with your accountant regarding your particular situation, but know that the&nbsp;Tax Cuts and Jobs Act jettisoned W-2 employees\u2019 home office deductions for the tax years 2018 through 2025. Microsoft calls this change in the law \u201c<a href=\"https:\/\/www.microsoft.com\/en-us\/microsoft-365\/business-insights-ideas\/resources\/tax-deductions-for-working-from-home\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">grossly unfair<\/a>,\u201d but there we are.<em>&nbsp;<\/em><\/p>\n\n\n\n<p>Clearly, those who start online businesses and pivot to self-employment or independent contractor status may deduct the portion of the home used for their businesses on Schedule C of their returns. If you\u2019re using actual expenses instead of the <a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/faqs-simplified-method-for-home-office-deduction\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">simplified method<\/a>, deduct $5 per square foot of office space, up to 300 square feet \u2014 so, up to $1,500 \u2014 and the portion of your communications equipment and utilities used in business. Also deductible are transportation, meals and entertainment costs for business meetings, and continuing professional education and licensing fees.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Disaster-Related Expenses<\/h2>\n\n\n\n<p><a href=\"https:\/\/www.govinfo.gov\/content\/pkg\/USCODE-2010-title26\/pdf\/USCODE-2010-title26-subtitleA-chap1-subchapB-partIII-sec139.pdf\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">Disaster-related expenditures<\/a> are not taxed as gross income. This could cover child care, commuting costs or medical costs related to Covid-19, and \u201creasonable and necessary\u201d emergency expenses such as buying a data plan, devices, and office furnishings and supplies for use at home. <\/p>\n\n\n\n<p>Indeed, as Microsoft observes, \u201cCalifornia, Pennsylvania,\nIllinois, Montana, Iowa and New Hampshire all require employers to reimburse\ntheir employees for necessary job expenses they pay themselves. These may\ninclude at least some home office expenses.\u201d<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Green Energy Upgrades<\/h2>\n\n\n\n<p>Remember the Residential Energy Efficient Property Credit?\nIt incentivized people to install alternative energy systems, and was slated to\nsunset (pardon the pun) at the end of 2016. But under the Secure Act, credits\nfor solar electric and water heating systems now extend through Dec. 31, 2021. <\/p>\n\n\n\n<p>For home installations done in 2019, you can get a 30%\ncredit (no need for itemized deductions here). The provision retroactively\nreinstated a $500 deduction for specified energy-efficient upgrades in 2018;\nspeak with your accountant if you did some home improvement in this area and\nbelieve amending your 2018 tax return could be worthwhile.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Medically Necessary Home Improvements<\/h2>\n\n\n\n<p>If you have a statement from your doctor saying so, equipment\nthat supports health and accessibility at home are deductible medical costs. If\nthe enhancements add up to more than 7.5% of your adjusted gross income, then these\nhome adjustments \u2014 wheelchair ramps, guardrails, shower modifications, accessible\ndoorways, stair lifts, the lowering of shelves, thermostats, and lighting and\nso forth \u2014 are completely deductible as long as they won\u2019t increase the home\u2019s\nassessed value. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Selling Costs<\/h2>\n\n\n\n<p>If you sold a property in 2019, various costs can be\ndeducted as long as you\u2019ve lived in the home more than two years out of the\nlast five. <\/p>\n\n\n\n<p>On the other side of the coin,&nbsp;if you sell the home for more than you initially paid, capital gains are taxed on the profit you made selling your home, right? Well, say you did earn a capital gain from the sale of your primary home. Under current tax law, <a href=\"https:\/\/www.irs.gov\/taxtopics\/tc701\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">you may exclude up to $250,000<\/a> of that gain from tax \u2014 up to $500,000 for couples filing jointly. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Peace of Mind<\/h2>\n\n\n\n<p>We\u2019re glad to be able to point out some key tax highlights to our readers during a complicated time in our financial lives. That said, this brief guide should not be taken as case-specific advice. Especially if you\u2019re a new homeowner or opting to handle your returns yourself, we recommend doing your own thorough research on taxes, and the information from the <a href=\"https:\/\/www.irs.gov\/publications\/p530\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">Internal Revenue Service<\/a> is a good place to start.<\/p>\n\n\n\n<p>The best way to be sure you\u2019re filing your taxes correctly is to consult with a professional. Today\u2019s accountants use online portals to help their clients submit state and local taxes, as well as estimated taxes for the self-employed. Depending on a range of individual factors, some deductions are capped, and some credits and deductions may differ or not apply to everyone. A reputable accountant will ensure you\u2019re getting every possible break, while steering clear of errors or anything that the tax authorities could find questionable.<\/p>\n\n\n\n<p class=\"has-small-font-size\">Photo credit: Kelly Sikkema, <a href=\"https:\/\/unsplash.com\/photos\/SBxdMoOY9zM\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">via Unsplash<\/a>. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>The new deadline for filing last year\u2019s taxes is Wednesday, July 15, 2020. Time to review the current tax implications of owning a home. First, we need to itemize homeowner deductions if we decide to claim them on our federal returns. There are a number of deductions available, but if you\u2019re like most homeowners, you [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[71,112],"tags":[],"class_list":["post-884","post","type-post","status-publish","format-standard","hentry","category-general","category-real-estate-taxes"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Real Estate Taxes: Tips and Updates - Deeds.com<\/title>\n<meta name=\"description\" content=\"The new deadline for filing last year\u2019s taxes is Wednesday, July 15, 2020. 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