Tax season is always Rough
Tax season is always rough, and when you’re a homeowner, there are definitely mistakes you certainly want to avoid. Here are a few:
Make sure you’re deducting the right year of property taxes for 2022.
Pay for the year of property tax is paid even if it’s labeled a different year. The IRS only cares about what you paid during 2022.
Your Escrow amount does not equal the Actual Taxes paid.
Lenders take out enough money to their estimated amount for taxes plus a little more or a little less. This usually your property tax bill may be different from the amount escrowed by your lender. Your lender will send you a Form 1098 showing exactly how much they paid from your escrow account for your property taxes. Use that form for your taxes.
Not tracking Home-Related Expenses
Keep your records you use for your tax deductions in either paper or electronic form. If you have sold or purchase property, you’ll want to keep the following records from the sale.
|Document||How Long to Keep It by HouseLogic|
|Home sale closing documents, including closing statement||As long as you own the property + 3 years|
|Deed to the house||As long as you own the property|
|Builder’s warranty or service contract for new home||Until the warranty period ends|
|Community/condo association covenants, codes, restrictions (CC&Rs)||As long as you own the property|
|Receipts for capital improvements||As long as you own the property + 3 years|
|Mortgage payoff statements (certificate of satisfaction or lien release)||Forever, just in case a lender says, “Hey, you still owe us money.”|
Claiming too much of your Mortgage Interest Deduction.
According to Houselogic, “If you’re eligible to itemize, the MID loan limit is $750,000. Before Dec. 16, 2017, the limit was $1 million. Make sure your loan is grandfathered before claiming the old limit.
Interest paid on home equity loans and second mortgages is deductible, but only if the proceeds of such loans were used to substantially improve the home that secures the loan. You can’t deduct interest on home equity loans that were used for things like student loans or cars.
And the amount of all mortgage loans (first, second, home equity, and loans for a second home) can’t exceed the $750,000 or $1 million limits.”
Article highlights from Houselogic
This post is to provide general information but shouldn’t be relied upon as tax or legal advice applicable to any transactions or circumstances. Please consult your tax professional or attorney for such advice.