Taxes

tax mistakes that can get you in trouble with the IRSEven though we're still six months or so away from that dreaded tax filing season, we wanted to bring to your attention some easy tax mistakes Scottsdale home owners often make and end up paying more than necessary to Uncle Sam. Making any one of these tax mistakes as they relate to your Scottsdale home can cost you money, or worse, draw the IRS to your doorstep for an audit.

Tax Mistakes #1 – Property Taxes in the Wrong Year

You take a tax deduction for property taxes in the year you (or the holder of your escrow account) actually paid them. Some tax jurisdictions bill a year behind — in other words, you don't get billed for 2013 property taxes until 2014. This doesn't really concern the IRS. Be sure to enter on your federal tax forms what you actually paid in 2013 regardless of the date of the bill. Don't claim the wrong amount based on dates.

Tax Mistakes #2 – Deducting the Wrong Tax Amount

Most people have an escrow fund held by their mortgage lender to pay your property taxes. Don't deduct the amount escrowed, deduct the amount the escrow service pays the taxing authority. The amount you regularly pay into your escrow account each month to cover property taxes is more than likely more, or may be a little less than your actual property tax bill.

You might have a tax bill for $1,500, but your mortgage lender may have collected $1,600 in escrow during the year as a part of your monthly payment. Only deduct the $1,500 tax bill amount, not 12 months of the escrowed tax amounts you pay with your mortgage payment.

Tax Mistakes #3 – Claiming Too Much Interest Deduction

You can deduct mortgage interest only up to $1 million of mortgage debt. If you have $1.5 million in mortgage debt, deduct only the mortgage interest on the first $1 million.

Tax Mistakes #4 – Deducting Points on a Refi

When you first buy your Scottsdale home, you can deduct all points the year you bought it. However, when you refinance a mortgage, you have to deduct points over the life of your new loan, not all the year you refinanced. If you paid $4,000 in points to refinance a 30-year mortgage, your tax deduction is around $133 per year.

Tax Mistakes #5 – Not Keeping Track of Capital Gains

If you sold your Scottsdale home last year, don't forget to pay capital gains taxes on any profit. Tax laws allow you to exclude $250,000 (or $500,000 if you're a married couple) of any realized profits from taxes. If your cost basis for your home is $200,000 (what you paid for it plus any improvements) and you sold it for $400,000, your capital gains are $200,000. If you're single, you owe taxes on $150,000 of gains. See IRS Publication 523 for more details on capital gains when selling your Scottsdale home.

For more tax related tips and articles as they pertain to your Scottsdale home, click over to our Taxes section under Scottsdale Real Estate Categories to your right.

Everyone knows that owning Scottsdale real estate offers significant tax advantages. A recent survey of people who had bought homes in 2012 showed 79 percent said the mortgage interest and property tax deductions were "extremely important" factors to their decision to become homeowners in the first place.

These two deductions are just the tip of the iceberg of all the real estate-related tax guidelines, advantages and dis-advantages.

Scottsdale Real Estate Scottsdale real estate moves with tax implicationsMoves That Trigger Surprising Tax Issues

Refinancing

Homeowners have been on a refinancing spree this year, spurred by continually low interest rates and a new resurgence in home values and equity. When you refinance into a lower interest rate mortgage than you previously had, the focus tends to be on the fact that your monthly payment is lower or that you can pay your home loan off faster with the same payment every month.

What many fail to calculate for is that the tax deduction based on your mortgage interest is the largest tax perk of home ownership. Most homeowners are eligible to deduct 100% of the interest they pay on a mortgage up to $1 million on their primary residence. So, if you reduce the interest you pay, you also reduce your mortgage interest deduction.

Believe it or not, less than 30 percent of homeowners take their mortgage interest deduction every year. This is thought to be because at lower income and home price levels, the standard deduction is higher than the itemized deductions for which many homeowners would be eligible. If you do itemize every year and/or you have a relatively high (or growing) adjusted gross income, you might be surprised at your tax bill the year after you refinance to a lower interest rate.

Remodeling

When you remodel your home, whatever you do, save your receipts. And this is not a 'save them until tax time' recommendation, it's a 'save them until you sell the place' mandate!  The money you invest into improving your home over time gets added to your purchase price, or cost basis, when you sell, bringing down the amount the IRS considers to be profit or gain and reducing your chances of incurring capital gains tax. (Single home owners can realize $250,000 of "gains" above the cost basis of their home tax-free; marrieds, $500,000.)

Many remodeling projects popular with homeowners these days trigger local and state tax credits. If you are remodeling and improving your home's efficiency at the same time, visit your state, county and city websites to see what tax credits or other financial incentives you might qualify for.

Whether or not your remodeling projects are eco-friendly, if you use a home equity line to finance them, chances are good that you can deduct the interest from that loan (up to $100,000) on top of your home mortgage interest deduction.

There are many Scottsdale real estate moves that may affect your taxes if you own your own home, so be sure to consult with your accountant or tax attorney, or do a lot of research and study on this topic yourself. The money you save in taxes could blow your mind. But the money you give to Uncle Sam if you don't do your homework, can blow your budget.

Now that the April 15th tax deadline has come and gone, it's time to start thinking about taxes for next year.

Most people are so glad to have tax season over with, the last thing they want to think about is taxes again, but now is actually the best time.

For those of you who are industrious and want to get a jump on next year's taxes, we have a lot of tax tips at our site. Just click on the link "Taxes" under the Scottsdale Real Estate Categories in the column to your right.

The April 15th tax deadline is almost here, and even though most Americans have already filed their taxes — especially if they were due a refund — the IRS says 20 to 25 percent of us will wait until the last minute. If you're one of those last minute procrastinators, here's some last minute tax advice to help you muddle through it again this year.

Remember what Stacy said in the video… don't panic and rush through your returns. If you don't have time to do them, follow his tax advice and just file an extension. It won't give you more time to pay (if you owe) but it will give you more time to file and do things right.

We have more tax advice and tips here at our web site. Just click over to the Taxes articles under our Scottsdale Real Estate Categories to your right.

Scottsdale Scottsdale homeowners get a lot of tax breaks.homeowners will soon be turning the calendar and looking squarely at April 15, the day income taxes are due. If you haven’t already done your taxes, you should be gathering up your W2s, 1099s, bank statements and receipts. If you’re missing anything, you don’t want to wait until April 14th to figure that out.

A few Congressional scares slipped by the cutting block again, at least for this year. Congress did not modify or repeal your right to deduct the mortgage interest you pay for being a Scottsdale homeowner. There are, however, some limitations for high-income earners. If you are single and earn more than $400,000 (or more than $450,000 if married), personal exemptions will be phased out and itemized deductions will be limited. If you fall in that category, you should discuss your specific situation with your tax or financial advisers.

Congress did not increase the capital gains tax rate for people who are not high-income earners. If you sold your principal house and lived there for at least two of the five years before it sold, you can exclude up to $250,000 of your gain if you are single (or up to $500,000 if you are married and file a joint tax return).

5 Major Tax Tips For All Scottsdale Homeowners This Year

1 – You have to itemize. If you’re looking to get tax deductions for a home you bought, something you did to your home, or something that happened to your home, you’re going to have to itemize your deductions, rather than taking the standard deduction. Fortunately, if you’re filing through TurboTax or another credible online program, you can itemize everything and then see whether or not you’ve topped the standard deduction, saving you a lot of complicated math.

2 – The Interest Deduction. The interest paid on your mortgage for being a Scottsdale homeowner might be good for a tax break. If you paid interest on your mortgage in 2012, it may be deductible. Basically, if you are itemizing deductions and you are filing a 1040, and your home loan qualifies, you can write off some or all of the interest you paid.

If you became a new Scottsdale homeowner in 2012, on a mortgage of up to $1 million, you can deduct the interest you paid at settlement if you itemize your deductions. This amount should be included in the mortgage interest statement provided by your lender.

If you paid points to obtain your mortgage, these fees are included on the income tax deductions list and can be deducted as long as they are associated with the purchase of the home. If you refinanced your home, these points are still deductible, but it must be done over the life of the mortgage.

3 – Property taxes.  Property taxes are sort of all over the map in the U.S., but a lot of areas offer tax breaks on property taxes as incentives for homeowners. Property tax exemptions vary not just by state, but by jurisdictions within each state. Research and paperwork might require some time, but the effort could lower your tax bill noticeably if you’re a Scottsdale homeowner.

4 – Home Office. More and more people are working from home these days (unless you work for Yahoo!). If you use a portion of your home exclusively for the purpose of an office for your small business, you may be able to claim a deduction on your taxes for costs related to insurance, repairs and depreciation. You may only claim this deduction if the space within your home is used exclusively and regularly as either your principal place of business or a place where you meet and deal with customers or patients. You may also be able to take advantage of this deduction if a portion of your home routinely is used for storing items (product samples, inventory, etc.) used in your business.

5 – Home Improvements. As a Scottsdale homeowner, if you installed new, energy-efficient appliances, doors, windows, or other systems in your home and haven’t exceeded the consumer energy efficient credit in previous years, you can save up to $500 (or even more), just for going green!

If you’ve taken out a loan to make improvements on your home, you may be able to deduct the interest on this loan. Qualifying loans are those taken out to add “capital improvements” to your home, meaning the improvement must increase your home’s value, adapt it to new uses or extend its life. New carpeting or painting are not considered capital improvements, while adding a garage, installing a water heater or building a deck are all examples of capital improvements.

Obviously there are many more deductions you may qualify for as a Scottsdale homeowner, but these are 5 of the most common. We strongly suggest you consult with an accountant or tax attorney if you’re not familiar with all the laws and changes that may or may not affect you as a Scottsdale homeowner.

For more tax tips, hop over to our Taxes Category under the Scottsdale Real Estate Categories to your right. We have a lot of additional tax tips for you there.