There are a number of common mistakes homeowners make on their taxes each year. And with all of the changes that have recently occurred, homeowners and investors are even more likely to make a mistake than they had been in years past. Learn more about the deductions available to you, what you’re entitled to and what you need to watch out for in our latest post!
When filing your taxes for 2018, there are a number of new things homeowners need to be aware of. While the laws are ever-changing, many new policies have recently gone into effect. Investors need to be diligent that their forms are filed correctly, and that they are capitalizing on the deductions available to them. You don’t want to find yourself overpaying or not paying enough, causing you trouble down the road. Below, we discuss four of the most critical mistakes homeowners are making when it comes to filing their taxes for 2018 in Fort Myers.
#1 – Can No Longer Deduct Moving Expenses
Previously, you were able to deduct moving expenses when relocating to a new home that was over 50 miles away. As of 2018, you are no longer able to deduct your moving expenses no matter how far away you are going, but there are some alternatives. This change has a huge impact on people who are moving a long way. Moving trucks, traveling costs, storage, and many other expenses of relocating can add up to thousands of dollars that you will, unfortunately, have to pay taxes on. People all over the country had previously advantage of deductible costs when making state to state moves. Today, this deduction is only available to people who serve in the US Armed Forces.
#2 – Property Taxes And Mortgage Interest Deductions
The recent changes in tax laws have introduced caps on certain deductions, particularly affecting state, local, and property taxes. Previously, taxpayers could deduct the full amount of these taxes from their federal income tax, but now there is a limit set at $10,000 per year for individuals or $5,000 for married couples filing separately. This cap has implications for homeowners, as it restricts the amount they can deduct, potentially increasing their taxable income if their state and local tax burden exceeds these limits. Moreover, the requirement that the taxpayer must be the homeowner to claim this deduction means that assisting others with their property taxes, even family or friends, does not qualify for the deduction.
Another significant adjustment concerns the deductibility of mortgage interest. While homeowners can still deduct mortgage interest, the debt limit for this deduction has been reduced from $1 million to $750,000 for new mortgages. This reduction affects new homebuyers or those refinancing their mortgages above this threshold. Additionally, the deduction for mortgage points paid and annual insurance premiums remains intact, providing some relief for homeowners who continue to pay interest on significant loans. These changes reflect a broader effort to reform tax policies related to homeownership and state taxes, aiming to balance federal revenue while potentially impacting deductions claimed by taxpayers, depending on their individual financial situations and property holdings.
#3 – Exclude Your Gains
Selling a property at a profit can be a significant financial achievement, but it often comes with concerns about capital gains taxes. Fortunately, there are valuable provisions in the tax code that can mitigate these worries. One such provision allows individuals to exclude up to $250,000 of their property gains from taxes, and up to $500,000 for couples filing jointly. This means that for many homeowners, particularly those who have held onto properties they no longer wanted just to avoid taxes, selling could actually be a financially advantageous decision.
It’s a common misconception that all property sales result in hefty tax bills. In reality, many sellers find themselves well below the thresholds where taxes become applicable. This knowledge can empower individuals to make more informed decisions about their property investments and financial planning. For those who do exceed the exclusion limits, there are still strategies available to minimize or defer taxes. One such strategy is reinvesting the profits into a “like-kind” investment under Section 1031 of the tax code, which allows for deferral of capital gains taxes if certain conditions are met. This provision opens up a variety of investment opportunities, enabling individuals to diversify their portfolios while potentially deferring taxes into the future.
In essence, understanding these tax implications can greatly influence how individuals approach property transactions. Rather than holding onto properties solely for tax reasons, sellers can evaluate their options more strategically, considering both their financial goals and the tax benefits available to them. This knowledge not only promotes sound financial decision-making but also encourages proactive planning that maximizes financial gains while minimizing tax liabilities.
#4 – Missing Write-Offs
Missing out on your deductions is like missing out on free money. As a Fort Myers homeowner, it’s important that you are capitalizing on all the deductions owed to you. Some common ones people might miss out on include medically necessary home improvements, solar panels, and other improvements made throughout the year. If you are a property investor, you will be able to write off your management costs, travel costs, and administrative expenses. You will also be able to deduct the fees for the professional services of lawyers, accountants, and property managers as long as their bills are solely for your investment property.
With all of the deduction changes, it is important to note that the standard deduction has nearly doubled under new tax laws. Single people are now able to deduct $12,000, whereas their deduction was only $6,500 in the past. Married couples who are filing jointly can now deduct $24,000, up from the $13,000 they could take in previous years. This means many more people are better off with the standard deduction as opposed to itemizing everything. If you haven’t had any significant changes over the past year, and if your taxes are low, the standard deduction will likely be right for you.