TAX DOCUMENTS HOMEOWNERS SHOULD HAVE BEFORE FILING

PriorityAlthough the deadline for filing income tax forms is a well-known date, homeowners expecting refunds usually want to file their taxes as soon as possible. For individuals who own their homes, there are nine essential documents to have ready before starting the tax forms.

1. Property Tax Statement. Homeowners are allowed to deduct their city and state property taxes. However, some localities bundle up miscellaneous expenses, which are not tax deductible. Make sure the amount deducted includes only the property taxes.

2. Mortgage Interest Statement. This type of interest is reflected on IRS Form 1098. The most significant tax deduction for many homeowners is mortgage interest. Homeowners are allowed to deduct 100% of the interest they paid during the applicable tax year. This includes points paid at escrow and prepaid interest. When mailing tax forms to the IRS, it is important to include a Form 1098 from the lender.

3. Uniform Settlement Statement. For individuals who bought or sold a home during the applicable tax year, this statement was probably issued after closing. It includes a listing of debits and credits for the buyer or seller. There are also several documented items that are helpful for filing taxes. Closing costs, discount points and taxes are just a few examples of the information included. Some foreclosure buyers might qualify for state tax breaks. Discuss this option with one of our agents to determine if such breaks apply in a specific state.

4. Moving Expenses. If a move is related to a job change, it might be tax deductible. There are specific rules for distance and mileage, so discuss these issues with our agents. This deduction only applies to people who work full time. Be sure to have receipts or a detailed expense report available. Keep in mind that meals are not included as deductible expenses.

5. Home Office Utilities. Self-employed individuals who use a portion of their home exclusively for business qualify for this deduction. The portion of the home's square footage used for business purposes should correspond with the correct portion of the utility bills. Not all types of expenses are tax deductible, so it is important to know exactly what the IRS allows.

6. Debt Cancellation Statement. This document comes on a Form 1099. Homeowners who experienced foreclosure or negotiated a short sale usually receive this form. The amount is equal to the total debt that was cancelled. For homeowners who only had the house for a short period of time, the amount might be very large. Unfortunately, the IRS considers this amount to be income, and all income must be taxed.

7. Efficient Energy Improvements. The Nonbusiness Energy Tax Credit allows homeowners who paid for certain improvements to claim special tax credits. In order to qualify, the improvements or upgrades must be on the approved list and must be energy efficient. The amounts can vary from one year to another, so be sure to read the current list from the IRS.

8. Income & Expense Statements for Rentals. Homeowners who are also landlords have a more complicated tax situation than the average American. However, having income and expense statements handy during tax preparation is important. It is crucial to be sure the depreciation numbers are accurate. This is a red flag for an audit, so enlist the help of a professional if necessary.

9. Mortgage Credit Certificate. Homeowners who purchased their properties within the past few years with a Mortgage Credit Certificate might be entitled to significant tax credits. Theses credits are based on the amount of mortgage interest paid. As long as a homeowner still lives in that specific home, he or she qualifies for this deduction. However, this is only allowed for owed taxes, so it is impossible to use this deduction to gain a refund.

Homeowners often have complicated tax returns. The key to ending tax season hassles is to maximize deductions and minimize audit flags. People who are shopping for homes should also consult with a tax professional or attorney prior to buying. Knowing all of the tax implications of buying is important. To learn more about owning a home and tax issues, discuss these issues with one of our agents.

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