12-02-2018 02:15 pm
When preparing to file your taxes, researching new tax breaks is important to give yourself the best financial advantage possible. There is quite a bit to take into consideration when organizing all your tax information and even more to consider when forecasting your finances in the upcoming tax year. Here are some of the tax breaks for the filing year 2018.
Standard deductions have increased, which means that fewer individuals will need to itemize to reduce their tax liability and receive the maximum amount of money back. Their are still many individuals who will benefit from itemized deductions. If you are planning to purchase a home or currently own a home, it is important to know how your taxes will be effected.
One benefit from home ownership is that you can deduct your mortagage interest on your taxes. Interest paid throughout ther year is deductible on your taxes for mortgages up to $1 million for a loan issued prior to Dec. 14, 2017 and up to $750,000 for any loans issued after that date. There are some monetary limits and restrictions so be sure to check with your tax preparer regarding your mortgage interest.
Home Equity Line of Credit Interest-
The interest on a home equity loan or home equity line of credit can also be deducted when you file your taxes. The rules have changed from the 2017 and 2018 filings according to the 2018 reform.The reform states that if you borrow against the equity in your home, the interest deduction is subject to the same $750,000 limit for total mortgage debt and only applies when the money borrowed goes toward the home itself. For more details contact your tax professional.
State and Local Property Taxes-
Deducting state and local proerty taxes on your federal tax filing is another benefit for owning your home.For 2017, the total amount of state and local property taxes are deductible. Starting in 2018, there is a cap of $10,000 on state and local property taxes that can be deducted.
If you are renting out space to a tenant, you are required to claim the rental payments as income. The benefit that comes from renting out space is that you can deduct the cost of repairs and improvements made to the rental space. This can reduce your taxable income dollar-for-dollar up to the amount you put into making improvements or repairs. It's a win -win!
Home Office Expenses-
Another way that homeowners are maximizing space and taking full advantage of being a homeowner is through working at home. If you work exclusively from home, there is a possibility you can deduct costs for the space if you itemize your deductions. It will be important that you speak with your tax professional to make sure you understand what types of things are deductable due to the red flags that a circumstance like this throws up. You may be more likely to be audited if you choose to utilize this advantage.
Capital Gains From a Home Sale-
The capital gains exclusion rule allows home sellers to keep the profit from a home sale without paying taxes on it. If you have lived on the property for two of the last five years you can make up to $250,000 profit as a single person and $500,000 as a married couple before having to report those earnings to the IRS. Speak with your tax professional regarding details.
News and Advice for Homeowners