Tax season is upon us and for those who purchased or sold a Smith Mountain Lake home last year, there are a number of tax deductions for which you may qualify.
For starters, the Internal Revenue Service says that if you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income as a single tax filer, or $500,000 on a joint return in most cases.
Here are some other factors to keep in mind:
1: Much of the interest paid on a mortgage is tax-deductible. A married couple filing jointly can deduct all of their interest on a maximum of $1 million in mortgage debt secured by a first or second home.
2: Real estate broker commissions, title insurance, legal fees, advertising costs, administrative costs, and inspection fees are all considered selling costs and may be used to reduce one’s taxable capital gain by the amount of the selling costs.
3: Refinanced mortgage points are deductible, but not all at once. Homeowners who refinance can immediately write off the balance of the old points and begin to amortize the new. Interest paid on a home equity loan or similar line of credit may also be deducted.
4: Points and origination fees on a home loan, which are paid during the purchase of a home, are generally tax-deductible in full for the year that they were paid.
5: Qualifying capital improvements can sometimes be deducted, including costs of a new roof, fence, swimming pool, garage, porch, built-in appliances, insulation, heating/cooling systems or landscaping.
6: If you move because of a new job, you may be able to deduct some of your moving costs. To qualify for these deductions you must meet several IRS requirements, including that your new job must be at least 50 miles farther from your old home than your previous job. Moving-cost deductions can include travel or transportation costs, lodging expenses, and fees for storing your household goods.
7: Property taxes are fully deductible from your income. If you have an impound or escrow account, you can’t deduct the money held for property taxes until the money is actually used to pay your property taxes. And a city or state property tax refund reduces your federal deduction by a like amount.
8: For those who took advantage of the first-time homebuyer credit the past two years: If within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit.
9: Another important tip for those who moved is to make sure you update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS.
Since tax laws change every year and certain tax deductions become available while others phase out, it’s always a good idea to speak with a professional tax consultant about these and other considerations.