With the month of April quickly approaching, many of us are concerned about the upcoming tax time. If you’re a homeowner, there are even more tax issues to consider and wonder about owing taxes as a homeowner? Here are five things to keep in mind.
You Can Deduct a Home Office
Millions of workers across the country have started working from home, and you may have heard that you can deduct a portion of your mortgage from your taxes if you use a room as a dedicated home office. While this is true, there is a catch. If you’ve been working from home but are employed by a company, you won’t be able to deduct your office space. This deduction is only applicable to those who are self-employed or freelancers.
You Owe Tax on the Land, Too
When it comes to owing taxes, you don’t only owe tax on the house itself. You’ll also owe taxes on the land you live on, also known as property taxes. Typically, property taxes are owed once per year instead of being added to your monthly mortgage payment. If you feel like your property tax is too high, you can actually attempt to dispute it.
You Can Deduct Your Mortgage Interest
New homeowners will certainly want to be aware that they can deduct their mortgage interest from their federal income tax return. If you take out a new mortgage, you will either have to pay or build up interest throughout the year; you can deduct that amount from your taxes. Keep in mind that the total mortgage debt has to be less than $750,000, and if you’re married but filed separately, it drops down even more.
Your Taxes Can Differ Even in the Same State
Suppose you buy a new home in a different county, but you stay in the state you already live in. You might be surprised to find that your taxes differ even though you didn’t move that far. While federal and state taxes will stay the same, your county and local taxes are likely to change. It probably won’t be a significant difference, but it’s definitely something to be aware of.
You Might Owe Capital Gains Tax When You Sell
Every homeowner will eventually become a home seller. When the time comes, there’s a chance that you will owe capital gains tax. There are, of course, a few exceptions. You can exclude $250,000 if you’re single or $500,000 if you’re married. To get these exclusions, you have to have owned and lived in the house for at least two years in the last five-year period. You also can’t get this exclusion if you’ve already gotten it on another house sale in the last two years.
Owing taxes as a homeowner can be complex, but doing your research is worth it. It doesn’t have to be as complicated when the time comes to sell. Working with a cash buyer like InHouse Offer can make the process quick and easy. You’ll get cash in just a couple of weeks and can move on with confidence. We buy houses in Ohio, so contact us today if you’re getting ready to sell!
