One of the constants in life is taxes. Unfortunately, we all have to pay our fair share. Anyone who is wise however will try to minimize their tax burden as much as they can.
By a show of hands who wants to pay more taxes? I didn’t think so! Below you are going to see some of the best real estate tax tips to help save you some money!
When it comes to taxes, it is always a good idea to look for ways to save money. Over the last thirty-two years working as a Hopkinton Real Estate agent each of these tax topics have come up on numerous occasions.
Take a look at the advice for the following Real Estate tax topics:
- How to handle your taxes when getting a divorce?
- What are the tax advantages of owning a home?
- How do real estate capital gains taxes work?
- How do your get your real estate tax bill lowered when it seems to be too high?
- What are the tax deductions when purchasing a home?
Use these top real estate tax tips to make sound financial decisions.
Tax Tips For Divorcing Homeowners
One of the most important economic considerations, when you are getting divorced and own a home, is the tax implications. There are several different ways you can handle the ownership of your home, each with different tax consequences.
One spouse can buy the other out, as long as you can both agree on a fair price and one, or the other can afford the full cost of the mortgage. You could also both sell the house and split the proceeds, with each of you earning up to $250,000 tax-free.
Another option is for one spouse to remain in the home to raise your children, then selling the home. To still get the tax benefits of ownership you will need an attorney to document that the home is still your primary residence for tax purposes.
You and your spouse could also share the house if you can handle the emotional stress of doing so.
If you and your spouse own rental properties, you should consult with your accountant to decide how to manage your investments during divorce best. Selling a vacation home is a similar situation, where you should talk with an accountant and possibly an attorney to understand your tax options.
For these reasons knowing the best tax advice for divorcing couples is vital. Take a look at some of the most important considerations you should be thinking about when it comes to taxes and divorce. One of the real estate tax tips you should take to heart is how each of these options will impact you financially.
Tax Benefits That Come From Owning A Home
In most instances, owning a home can net you thousands of dollars in tax deductions. You can see a complete summary of the tax benefits of home ownership here. Some of these deductions include the capital gains deduction, which allows you to earn up to $250,000 on your own, or $500,000 as a married couple, tax-free from the sale of your home.
Mortgage interest can also be deducted, up to $1 million worth. Discount points – which lower your interest rate on your loan – are also tax deductible. You can also deduct property taxes, which can amount to thousands of dollars a year depending on your area.
If you have mortgage insurance, you can also deduct the cost of the insurance off of your tax bill. Some home improvements can add value to your final sale price, which carries additional tax benefits. Home equity loan interest can be deducted at the end of the year, as can your home office if you have one.
Just keep in mind that the home office deduction does tend to get audited, so you should make sure you do conduct business from your home.
Real Estate Capital Gains And Your Home
The real estate capital gains tax law one of the best tax breaks available to the average person. The current laws allow you to make up to $250,000 in profits from your home sale before you have to pay taxes.
If you are married, you can make up to $500,000 before taxes are owed. Anything made over the limit is then taxed at 20%. So if you were to buy a home at $500,000, then sell it for $800,000 after living there for a while, you would make $300,000. As long as you are married, you would get the $300,000 profit free and clear.
You do have to meet the requirements for the tax gains, including having the home you sell as your primary residence, not a vacation home or rental home. You will also want to be careful if your spouse has used the exclusion in the past two years – like selling a home before marrying you.
It takes two full years before you can use the exclusion again, so you may want to wait on selling the home. There are some caveats, however, like if you are in the military or if your spouse passes away.
Take a look at the article for all of the rest of the rules regarding the real estate capital gains tax law! You are guaranteed to see some excellent tax advice you were not aware of.
How To Challenge High Property Taxes
While taxes are a part of life, no one wants to pay more taxes then they have to. For homeowners, property taxes can be a significant expense. It can be upsetting to discover that your property taxes are going up, especially if you don’t feel like your home’s value has increased that much.
If you want to try and understand how to lower your property taxes, you will need to some homework. You should educate yourself on how the property taxes are assessed. In this article, you will see a comprehensive review of how to get your tax assessment lowered if you believe it is not appropriate based on other similar properties.
The first thing you can do is visit your local assessor and ask about how property taxes are determined and how an assessment can be appealed. You can also get the field card for your property, which contains details that you may be able to contest.
A real estate agent may be able to help you gather evidence to prove that your home is only worth a certain amount, the evidence you could you use to appeal your home’s assessment.
Keep in mind that there are deadlines in many areas for when you can challenge an assessment. Make sure to get your appeal in before the deadline if you want to make a change.
Tax Deductions When Purchasing A Home
One of the biggest differences between owning a home and renting one is the allowable home buying tax deductions you can take advantage of. There are a lot of options for deductions in a home purchase.
You can deduct the cost of mortgage points – which allow you to lower your overall interest rate. You can also deduct your prorated mortgage interest and your prorated real estate taxes. If you take out a construction loan to build a new home, you can deduct the interest on the loan as long as the home is your primary residence.
If you have a mortgage where prepayment carries penalties, you can deduct the penalties once you pay off the loan early. Mortgage insurance can also be deducted, as can your mortgage interest for loans up to $1 million if you are married and filing jointly.
If you use a home equity line of credit to purchase something, you can also deduct the interest from the 2nd mortgage as well.
Working with a qualified accountant can help you take advantage of every available tax deduction from your home purchase.
Additional Helpful Real Estate Tax Advice
- Real Estate tax center via The IRS.
- Tips for lowering a real estate tax assessment via Active Rain.
- Minimize your capital gains taxes via Your Piece of Marin.
- Tax deductions for buying a home via Selling Warner Robbins.
Use these additional references to help make sound decisions when it comes to real estate taxes. The thing about taxes is you can never be too educated! There are always opportunities to save money on your taxes if you are familiar with the ground rules.
About the Author: The above Real Estate information on best real estate tax tips was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at [email protected] or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 31+ years.
Are thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton and Uxbridge MA.
Hello Bill, I have invested money in three properties. I have read your post and these are the great tips related to real estate tax. Thanks for sharing tax benefits of owning a home. Really appreciate your efforts..!!
Wow, I had no clue that mortgage interest deductions went up so high! Owning and selling your home really offers so many benefits for tax payers, but most seem to fail to take advantage of them. Thanks for sharing!