Figuring Your 2017 Taxes? Don’t Overlook These Potential Real-Estate-Related Deductions
Tax law encourages homeownership by allowing homeowners to deduct certain expenses related to buying real estate. While some laws are changing for the 2018 tax year, many of the familiar deductions are still in effect for 2017.
So if you’re just digging into your 2017 taxes, gathering your documents and filling out your Form 1040, here are a few things to consider. Please note that this article does not constitute tax advice, and you should consult a tax professional for guidance on your unique situation.
Many people confuse a tax deduction with a tax credit. The IRS defines a tax credit as an amount you can subtract from the tax you owe. Credits can be nonrefundable, which means the amount of the credit is only refunded up to the amount you owe, or refundable, which means you can get money back even if the credit exceeds the amount owed.
Deductions are subtracted from your income, so your tax bill may shrink. Homeownership generally confers deductions, and you have to itemize them to get these benefits. So if your itemized deductions add up to more than the standard deduction for 2017 – $6,300 if you’re single or married filing separately, $12,600 if married filing jointly or a qualifying widower, or $9,300 if filing as head of household – you could potentially get some tax breaks from homeownership in 2017.
To itemize your deductions, you have to file your taxes on Form 1040 and use Schedule A.
If you’re a longtime homeowner or just bought a house in 2017, much of what you need to know is in IRS Publication 530, Tax Information for Homeowners.
Here’s a list of some home-related deductions you might be able to take advantage of:
Home mortgage interest on up to $1 million ($500,000 if married filing separately) on a primary and second home.
Unreimbursed moving expenses, if you meet distance and time requirements; see IRS Publication 521.
Points paid to obtain a mortgage, but see the rules in Publication 530. Generally, you can’t deduct the full amount of points in the year paid, but there are exceptions.
Capital improvements for accommodating a disability, including in a rental home if the property is rented by someone with impairments. See IRS Publication 502. These expenses can be included among your itemized medical and dental expenses, which may be deductible after they exceed 10 percent of your adjusted gross income. Medical-related improvements that increased the value of the property aren’t deductible.
Interest on up to $100,000 of home equity debt, ($50,000 if married filing separately).
Generally, you can’t deduct:
Mortgage, homeowners or fire insurance premiums.
Principal you pay on the mortgage.
Most closing costs.
Taxes next year might be a different ballgame, particularly for homeowners who have counted on relatively high amounts of interest and property taxes they’ve paid to help them reduce the amount owed the IRS. Those deductions will be capped for the 2018 tax year, and the standard deductions are set to increase. We’ll see how these changes play out in terms of buyer and market behavior over the next few months.
Marnie Schaar & Associates Long & Foster Real Estate are licensed Virginia Real Estate Agents
Email: Marnie@LNF.com Cell: 703.509.3107 2100 Reston Pkwy Suite 102 · Reston, VA 20191
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