Filing your taxes can be a complicated and confusing process. If you are a home owner you may have many different home tax deductions and credits to consider.
Since we recently passed the filing date for 2012 taxes, it may be a good time to plan for next year and get your tax tracking systems in place. Check carefully to make sure that you are not making any of these common homeowner tax mistakes – which could cost you money or get you in trouble with the IRS.
Miscalculating Your Home Office Tax Deduction
If you work from home, you will be able to deduct a percentage of your housing costs for your home office. However, most people don’t know how to calculate this and don’t realize that it also has to be recaptured when you eventually sell your home. You will only want to claim it if it is worth it, so make sure you know exactly what you can write off.
Failing To Keep Track Of Home Expenses
Don’t forget to keep a record of home maintenance, repair expenses and any other relevant documents as you go along. The money you spend on improving your property can help offset future capital gains tax. Keeping good records will save you a lot of headaches when tax time comes around.
Forgetting To Pay Tax On Capital Gains
If you have sell your primary residence this year, you will need to pay capital gains tax on any profit that you have received. Capital gains are the amount that you gained on the property’s value – so if you bought it for $150,000 and sold it for $300,000, your capital gains are $150,000. You may be able to exclude $250,000 of any profits for taxes, or $500,000 if you are a married couple if this exclusion stays the same as in 2012.
Deducting The Wrong Year For Property Taxes
Remember that you must take the tax deduction for your property taxes in the year that you have actually paid them. No matter what the date is on your property taxes bill, you should enter the amount that you paid in the calendar year. If you confuse this part, you might end up claiming the incorrect amount for the year.
These are just a few of the common mistakes that home owners can make when filing their taxes. Avoiding these mistakes will ensure that you pay the right amount and avoid any hassle from the IRS. Also, please double-check all of these suggestions with a qualified, licensed tax preparer in the Chicago area.