When it comes to filing your taxes, there are many common amateur mistakes that you should avoid committing.
Whether you just received the keys to your very first home or you’ve bought and sold several houses, filing taxes as a homeowner is anything but easy. While there may be a few basic deductions for which you will qualify, there are plenty of others that may not be very obvious–these mistakes could potentially put you in some hot water with the IRS (which is something that nobody wants). To maximize your tax benefit while avoiding an audit, you’ll want to steer clear of the following rookie mistakes.
Rookie Mistake #1: Assuming you pay your taxes through escrow, you likely paid an amount that was either higher or lower than what your property taxes were. The amount you deduct on your taxes must match your bill. Thus, deducting your full escrow amount is a no-no. What you’re allowed to deduct is located in box 4 of the 1098 Mortgage Interest Statement.
Rookie Mistake #2: In the past, the home office deduction was like tiptoeing through a lion’s den. One false move, and it’s lights out for you. Now, with more people working from home, it’s not as dangerous, but it still requires you to adhere to the rules. For example, the space can’t serve a dual purpose: it must be used exclusively for your business.
Rookie Mistake #3: Deducting the wrong year is common and something you have to pay strict attention to. The tax deduction is only for the property taxes you paid in that year. So while it may be 2017 for the next tax season, it’s 2016 for which you have to pay.
If you have questions about how owning a home affects your taxes, contact me, Andraya Coulter. I serve the Bay Area and the entire states of California and Texas with top-tier home loans and solid advice. As a homeownership expert, I can help you avoid common tax pitfalls and make the most of your house!