Filing your taxes can be a complicated and confusing process and if you are a Santa Cruz home owner you will have a lot of different home tax deductions and credits to consider. Before you submit your taxes, check carefully to make sure that you are not making any of these common home owner tax mistakes – which could cost you money or get you in trouble with the IRS.
Miscalculating Your Home Office Tax Deduction
If you work from home, you will be able to deduct a percentage of your housing costs for your home office. However, most people don’t know how to calculate this and don’t realise that it also has to be recaptured when you eventually sell your home. You will only want to claim it if it is worth it, so make sure you know exactly what you can write off.
Failing to Keep Track of Home Expenses
Don’t forget to keep a record of home maintenance, repair expenses and any other relevant documents as you go along. You should also keep your government statements that confirm you have paid your property taxes. This will save you a lot of headaches when tax time comes around.
Forgetting to Pay Tax on Capital Gains
If you have sold your main property last year, you will need to pay capital gains tax on any profit that you have received. You will be able to exclude $250,000 of any profits for taxes, or $500,000 if you are a married couple. Capital gains are the amount that you gained on the property’s value – so if you bought it for $150,000 and sold it for $300,000, your capital gains are $150,000. In this case, a single person would owe taxes on $50,000 of gains.
Deducting the Wrong Year for Property Taxes
Remember that you must take the tax deduction for your property taxes in the year that you have actually paid them. No matter what the date is on your property taxes bill, you should enter the amount that you paid in the calendar year. If you confuse this part, you might end up claiming the incorrect amount for the year.
These are just a few of the common mistakes that Santa Cruz home owners make when filing their taxes. Avoiding these mistakes will ensure that you pay the right amount and avoid any hassle from the IRS.
To find out more, call me at 831.662.6522 or email me at Lauren@LaurenSpencer.com.
For additional real estate information, please visit my home page at www.MySantaCruzRealEstate.com.
Resources:
Deduct a percentage of your housing costs
Capital gains tax
Keep a record
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