Before tax season hits, think about brushing up on your property tax know-how to save money and ease stress. Whether you’re buying, staying or selling, in this tough housing market, the more you know the better. Below, Diane Turton, President/Broker of Record of Diane Turton, Realtors shares her top five tax tips with us.
1. Understand your capital gains tax.
“So many homeowners don’t understand how their capital gains tax is calculated when selling,” says Turton. When you sell your home, you’re taxed on any profit over a set amount, which changes based on your marital status. However, calculating your gains isn’t as simple as price sold minus price paid. “The IRS takes into account expenses invested in improving the property, so be sure to save receipts for any repairs, maintenance and upgrades,” adds Turton.
2. Get a reliable estimate of your property tax bill.
This is a top tip for those looking to buy a new home. “Don’t rely solely on the tax information in the property listing. Your tax bill can differ from the previous owner’s bill, so do your research,” Turton suggests.
3. Deduct the interest.
“On your tax return, you can deduct the interest you pay on your home loan,” says Turton. This deduction reduces your tax liability, and as your mortgage payments for the first few years are almost entirely interest, this means they are almost entirely tax deductible.
4. Lower your interest rates—deduct property taxes and points paid.
The IRS allows you to deduct your state and local property taxes from your income tax return, which can help to offset their expenses. “Plus,” Turton continues, “You get a tax benefit if you paid for discount points to lower your mortgage interest rate.”
5. Market value declined? Request a property tax reassessment.
You can get your taxes lowered if the value of your home has decreased. “All you need to do is show proof of your home’s current market value and recent comparable sales in your neighborhood,” Turton explains.