In 2017, 31.9% of all taxes fell under the category of a property tax.
If you’re trying to save money on your taxes, you might be interested in real estate tax deductions.
But what are they? And how do you use them? Keep reading, and we’ll break down everything you need to know.
What is a Real Estate Tax Deduction?
A tax deduction is something that will let you save money when you file your taxes each April. One of the things that you can save money on is through your real estate tax deduction.
A real estate tax deduction is a deduction from your overall taxes, and it can include all kinds of things from taxes you paid at a closing cost or assessments of your personal property.
According to the Internal Revenue Service (IRS), this includes any property in your name, even if it’s located on foreign property outside of the United States.
However, these deductions don’t include home renovations or yearly services like sewage or collecting trash.
After the Tax Cuts and Jobs Act, there was a higher cap on the property tax reduction, so now you can easily claim more money.
What is Deductible?
If you’re married and filing together, you can deduct about $10,000. However, if you’re not married or filing separately, you will be only able to claim about half of that.
You can deduct a few things from your taxes each year, like capital allowances, your main home, any vacation home, land you own (like a farm), or any property that isn’t even in the United States.
In some cases, you can also claim vehicles, like boats, cars, RVs, and other vehicles.
You might also be able to deduct a co-op apartment. However, make sure you look at the rules from the IRS on that because there are specific cases.
What Isn’t Deductible?
While there are a lot of things that are deductible, there is plenty that isn’t as well.
For example, you can’t deduct taxes on property that you don’t own or haven’t paid off yet.
You also won’t be able to write off any assessment for a street, sidewalk, or sewer, or water system. However, you will be able to deduct it if any repairs are needed.
A few other things you can’t deduct include:
- Assessments on Homeowners associations
- Payments on certain loans
- Taxes on services like water, trash, or sewage
If you’re still not sure what you can or can’t write off on your taxes, make sure that you talk to your tax advisor, and they’ll let you know if you’re on the right path or not.
How Do You Get It?
Now that you know what you can deduct, you’ll have to figure out how to actually get it.
In order to deduct them, you’ll either have to make an itemized list of everything or just use a standard deduction. Both methods are good, but you’ll have to sit down and figure out which one is best for you.
Since the Tax Cuts and Jobs Act, many people use the standard deduction because the cap is raised. This makes it not worth it for many people to take the time to itemize their list.
However, if you think your deductions can be more than what a standardized deduction would be, you can always itemize the list.
One easy way to figure out if you should use a standard deduction is to try and add up everything you would deduct. For example, a standard induction includes your medical expenses if they were more than your income, part of your mortgage interest, and charity donations, and certain taxes on your property.
If your deductions go above what is allowed from those categories, make an itemized list.
How Do You Get a Bigger Deduction?
While deductibles can help you save money and owe fewer taxes, you’ll need to know how to make sure you get the biggest deduction possible.
There are actually a few strategies you can try as well.
First, you could try paying your taxes earlier. Most taxes are due in April, but you could actually save money by paying them early.
For example, try paying them in December, and this will deduct from the previous year rather than the year it’s due.
Next, make sure you go through all your registration statements. Even if you’re just renewing your vehicle, make sure you check to see if there are any property taxes hidden in there. If there are, you can use that to deduct on your tax form.
Lastly, go back and look through all of your recent closing paperwork. Whether you’re selling or buying a house, you’ll be able to see what you had to pay in closing property taxes, but you may have to know where to look.
Many people don’t recognize it, but if you can see how much you paid, this can be a great thing to deduct from your taxes.
Learn All About Real Estate Tax Deductions
These are only a few things to know about real estate tax deductions, but there are many more things that you should figure out before filing your taxes.
We know that it can really confusing and overwhelming, but when in doubt, reach out to your tax advisor. They should be able to help guide you in the right direction.
We’re here to help you out as well! If you enjoyed this article, make sure that you explore our website to find more articles just like this one.
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