Taxes

As the Scottsdale tax deadline looms closer and closer, homeowners should be careful not to make any of these costly home-related mistakes. Tax professionals say these mistakes are common among homeowners who either don't know the current tax laws or are careless in their paperwork.

Scottsdale Tax Tips: Avoid Costly Errors

Avoid making these costly Scottsdale tax errors when filing your income taxes this year.

Mistake #1: Deducting property taxes for the wrong year Although it can sometimes be confusing, you should deduct the amount of property taxes for the year for which you actually paid them. In other words, if you're billed for your 2015 property taxes in late 2015 but actually pay them in 2016, you may only deduct the amount you paid during the tax year in which you're filing. On your federal tax forms, you should enter the amount you actually paid in that tax year. If your taxes are being escrowed each month and paid by a third party such as your mortgage lender or loan servicer, enter the amount they show they paid during that taxable year.

Mistake #2: Confusing actual taxes paid with the amount escrowed If your lender escrows your property tax payments each month, don't simply just deduct the amount being escrowed. The normal amount you pay every month as part of your principal, interest, taxes and insurance (PITI) is actually slightly more or less than the actual property tax amount. Your mortgage lender or loan servicer usually adjusts the escrow amount each year to make sure the amounts match as closely as possible. As an example, let's say your property tax bill is $1,200. Your lender may have collected $1,100 or $1,300 in escrow during the year. You should deduct only $1,200 or whatever the lender-provided Form 1098 shows. That is the actual amount of property taxes that was owed and paid on your behalf. You are entitled only to deduct that amount. Should you not receive the Form 1098, contact your lender or loan servicer as soon as possible to find out how much they paid on your behalf – and get a replacement copy for your records.

Mistake #3: Deducting points you paid to refinance your mortgage You are allowed to deduct points (or a certain percentage of your loan amount) paid to your lending institution to get your mortgage. You can deduct that amount in full for the year in which you purchased your home. But, if you refinance your loan, you are only allowed to deduct points over the life of the new loan. In other words, let's say you paid $2,000 in points as part of your refinance on a 15-year mortgage. Your allowable Scottsdale tax deduction is $133 each year for 15 years ($2,000 divided by 15 years.)

Mistake #4: The home office tax deduction There's probably no deduction that's more misunderstood than the home office tax deduction. Although it's not all that complicated, and usually doesn't total very much, it must be recaptured if you enjoy a profit when you sell your home. It's also one of the areas on your Scottsdale  tax returns that often invites scrutiny from the IRS. However, the good news is that there's a simplified home office deduction option available if you opt not to claim actual costs. If you meet the eligibility requirements, you can deduct $5 per square foot up to 300 square feet of office space in your home for a total of $1,500 a year.

Mistake #5: Failure to repay a first-time homebuyer tax credit If you were one of millions of Americans that took advantage of the original one-time homebuyer tax credit in 2008, you are required to repay 1/15th of that credit over 15 years. If the tax credit was used in 2009 or 2010 and you then sold your home or stopped using it as your primary residence. you must also pay back the credit. Need help with it? The IRS has an informative tool that can help you figure out how much you owe. Visit their website at www.irs.gov.

Mistake #6: Failure to keep up with home-related expenses Hopefully, if you're deducting home-related expenses, you have sufficient records you can access easily if you need to. Maintain a file or computer desktop scan to store home office and home improvement expenses and receipts in case you are audited or asked questions by your CPA or the IRS.

Mistake #7: Not keeping track of capital gains for your Scottsdale tax returns If you sold your primary residence in 2015, remember you'll have to pay capital gains taxes on any profit you enjoyed. Typically, you are able to exclude $250,000 of the profits from taxes (or up to $500,000 if you are married and filing jointly.) If, for example, the cost basis of your home is $100,000 – the amount you paid for it plus any additional improvements – and you sold it for $400,000 the capital gains are $300,000. if you're a single taxpayer, you would owe taxes on $50,000 of gains. Remember, however, there are minimum time limits for holding on to property in order to take advantage of the exclusions. See IRS Publication 523 if you have questions or need additional information. One additional tip: if you're in a higher tax bracket you'll probably have to pay an additional tax.

Mistake #8: Filing incorrect energy tax credits Home improvements made in either 2015 or 2016 may be eligible for a 10% tax credit. If you installed an energy-efficient heating and cooling system, for example, you may qualify for the 10% tax credit. You may also be eligible for the Residential Energy Efficient Property Credit if you installed a solar electric, solar water heater, geothermal, or small wind energy system. Claim the deduction by completing Form 5695, which can be confusing. Read the instructions carefully and ask your CPA if you have questions.

Mistake #9: Claiming more than you should for mortgage interest U.S. taxpayers are allowed to take a deduction of up to $1 million in mortgage interest for a home purchase. In addition, they can deduct up to $100,000 in home equity debt. You can only deduct the interest on your mortgage that you actually paid during the Scottsdale tax year. That includes amounts that you may have prepaid in an effort to reduce your loan balance faster by paying an additional month's payment.

Get more tax tips by visiting our other articles in the "Taxes" section of our site under Scottsdale Real Estate Categories to your right. And don't forget to Find us on Facebook and Follow us on Twitter. We do post occasional tax tips there as well.

It's almost time for filing Scottsdale tax returns and the IRS would like you to be aware of some changes before you file your 2015 returns. First, due to the Emancipation Day federal holiday in Washington, DC the filing deadline will be Monday, April 18th this year. When you do get ready to file, consider this.

Filing Scottsdale Tax Returns? Do This

Be aware of the new 1095 form. It requires you to report to the IRS where you obtained your health insurance. The Affordable Health Care Act, also known as Obamacare, introduced three new tax forms relevant to individuals, employers and health insurance providers. They are forms 1095-A, 1095-B and 1095-C.  The penalty for not having health insurance has increased substantially this year – to $325 or 2% of your taxable income, whichever is greater. For individuals who bought insurance through the health care marketplace, the 1095 form will help to determine whether you are able to receive an additional premium tax credit or have to pay some back.

Here are a few suggestions to help make filing your Scottsdale tax returns a little easier this year.

1) Make sure you have all of the documentation needed: tax forms, W-2 forms, 1099 forms, deductions, etc.

2) You can download a free copy of the IRS guide that explains tax deductions and other information. There's also information available on the irs.gov website for how you can get help if you need it.

3) Taxpayers making less than $62,000 yearly can file tax returns online – for free. Following these tips and others will help make Uncle Sam a little happier – and it may just make tax season a little less taxing for you.

 
For more information on Scottsdale tax returns, see our articles to the right under Taxes below Scottsdale Real Estate Categories. We also post articles on Facebook and Twitter, so look for us there, too. And have a Happy Valentine's Day!

Scottsdale tax deductions are valuable commodities. And like most valuables, they are often well guarded. Deductions have been compared to buried treasure — because they are so valuable and they’re often buried, or at least hard to find. Deductions reduce the amount of income you’re taxed on, which reduces your tax liability. Here are a few deductions that are often overlooked.

5 Overlooked Scottsdale Tax Deductions

Charity. Most people are aware they can deduct charitable contributions. But, did you know that if you volunteer your time you can also deduct 14 cents per mile to and from the charity’s location? In addition, you can deduct the cost of supplies needed for the work you perform for the charity.

State Sales Tax. When you’re filing your tax return, you have to choose between deducting state sales taxes and state income taxes. So, this deduction is best for those taxpayers that don’t have a state income tax.

Dependent Care Credit. While most parents of young children are familiar with the dependent care credit, many may not be aware that it may also apply to summer day camp costs. You may even qualify for a deduction for adult dependent care. Some restrictions apply, of course, but it may be worth looking into when you’re looking for Scottsdale tax deductions.

Retirement Plan Contributions. Contributing to your retirement plan can earn you a deduction. If you are in the low to moderate income range, you may also be able to earn a tax credit for the contributions to your retirement account. For more information, search the web for Retirement Savings Contribution Credit.

Job Search. If you’re searching for a job, you can deduct a number of things such as employment agency fees and resume preparation costs. Every dollar you can deduct can save you from 10 cents to 40 cents on your income taxes. So it pays to find as many Scottsdale tax deductions as possible that apply to you. Be diligent in your search, or even better, consult a tax professional well versed in deductions for which you may qualify.

For more information on Scottsdale taxes, see our articles to the right under Taxes below Scottsdale Real Estate Categories.

Scottsdale taxes can throw some retirees a curveball if they're not knowledgeable or prepared. Like most Americans, you've worked hard all your life and saved or invested for years to be able to enjoy retirement. What you don't know about taxes could make retirement a little less enjoyable.

Scottsdale Taxes – What to Know

IRA or 401(k) accounts. If you withdraw money from a traditional IRA or 401(k) you will be taxed as if it was ordinary income. Withdrawals of earnings from a Roth IRA, however, are tax-free if you're at least 59 1/2 and the account has been open for a minimum of 5 years. Remember, contributions to your Roth IRA can be withdrawn at any time tax-free since the contributions were made with after-tax money.

Regarding taxable accounts, the tax liability depends on the kinds of investments you own and how long you've had them.

Savings accounts and CDs. Interest is taxed as ordinary income.

Stocks, mutual funds and other investments. You will pay no tax on the capital gains from the sale of stocks or mutual funds if you're in the 10% or 15% tax bracket — provided you've owned those investments for a year or longer. People in higher tax brackets will pay 15% on long-term capital gains.

Government pensions or private retirement pensions. These retirement pensions are usually taxable at your ordinary income rate.

Social Security benefits. Surprising to many retirees is that a portion of your Social Security benefits may be taxable. The tax liability depends largely on your other sources of income and their amounts. Up to 85% of your Social Security benefits could be taxed.

The impact of state and local taxes. If you move out of state, you could be facing a higher tax bill. While seven states have no income tax, they compensate by having higher real estate taxes or retail sales taxes. Still, many states with income taxes make retirement attractive by offering retirees generous breaks that may help to lessen or erase your tax bill.

 
 For more information on Scottsdale taxes, see our articles to the right under Scottsdale Real Estate Categories.

Higher Scottsdale property taxes are sometimes a good thing. That’s because it usually means home values have increased. Did you know that if you feel your Scottsdale property taxes are too high you can file an appeal? Here are a few tips to follow.

Review Scottsdale Property Taxes

When you receive your tax notice, examine it closely. Look for errors that may be mistakenly inflating the value of your home. Ask your county’s tax assessor’s office for a property record card and review it carefully. The property record card lists the components used to come up with your property’s assessment. This information may also be available online. Obvious mistakes such as an incorrect square footage or the wrong number of baths will reduce the value of your home — and that will reduce your property taxes.

Review the property tax bills for similar properties in your neighborhood. The tax notices are part of the public record and may also be available online. Compare your home to homes of a similar age or size. If your assessment is higher than the others you may have good grounds for an appeal.

Make sure you received all the property tax breaks you’re entitled to. Most states offer taxpayers certain exemptions, lower tax rates or reduced assessment ratios. The lower rates may apply to homeowners using their home as their primary residence, senior citizens or military veterans.

Your state’s tax department website is also a good source of information on how to appeal your Scottsdale property taxes. And you can also visit the National Taxpayers Union website, www.ntu.org.

 
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