What is the difference between a home repair and a home improvement? As defined by the IRS, an improvement lasts for more than one year and adds value to your home. There are exceptions, such as when the upgrade is no longer part of your residence. (Ex. You installed wall-to-wall carpet years earlier and then replaced it with wood flooring.). In cases of fire damage and natural disasters, all work applies, from the smallest repair to the largest addition. Knowing these details is especially important when you plan to sell your home because it may help reduce the taxes you owe on profit.
Ever thought about renting your home for holiday travelers or summer vacationers? Or maybe during a music festival or race? There are tax implications that come with this type of real estate. Before you take the plunge, read this informative article by Mike D’Avolio, CPA, J.D. for the Journal of Accountancy.
In the current anti-tax climate, some towns are finding it hard to produce enough money to keep even basic city services afloat.
As we enter tax season, it’s time to examine a variety of deductions you may be eligible to take. Home office deductions are a simple way to recoup money when using your home as an office space. Those who are self-employed or part of an LLC have one form to complete this process, but S-Corp brings a new challenge. Thank you to wilsonrogers.net for this detailed description of how to legally claim this important deduction.
Recently there has been a rash of phone scams concerning taxes. Many people have paid money over the phone, believing that they would be in trouble with the US government if they did not. As a certified public accountant, I wanted to make sure you understand that the IRS will always send you a letter first. They do not make cold calls demanding money. Please read this article to better inform yourself about the scams currently in play, and remember that the IRS will not call you, they will send a bill.
As college expenses continue to increase, grandparents are beginning to step-in and offer assistance to their grandchildren. John F. Wasik, for the New York Times offers sound advice for those wishing to help with their grandchildren’s college expenses. The Best Way to Help a Grandchild With College. There are many aspects to be considered in order to maximize your monetary support of a student, such as when the money is applied or whose name appears on the account. Read the full article to learn more about the amazing gift of higher-education that you can share with your grandchildren.
Today is one of the most stressful dates for many Americans. April 15th, Tax Day brings all kinds of worries for those who have waited to complete their tax forms and not sought the help of a CPA. On the other hand, accountants are just coming to the end of an extremely busy work season. Maureen Schwartz offers a humorous view of living with a CPA during this time and how best to care for them. Happy tax season and raise a glass to your and all CPAs in the US this monumental day! The 10 simple rules of caring for your CPA this busy season
Every year people spend hours searching madly for those few missing receipts that will substantiate a tax deduction. An IRS audit is a real fear in the United States, one that is portrayed in television shows as a horrific experience. But did you know that receipts aren’t always a requirement when proving your deductible expenses? Thanks to past Broadway pioneer George M. Cohan, who paid in cash and fought the system when they denied his claims, we have the Cohan Rule. Not the easiest rule to use, you might wind up in court, but good to know in case you ever end up in this situation. Still, probably better to just keep saving your receipts.
As the 2015 tax season draws to a close, we wanted to share an article from Maxwell, Locke and Ritter, LLC about the Tax extenders and provisions that have been made permanent by the passing into law of the Protecting Americans From Tax Hikes (PATH) Act of 2015.
Never hurts to know all the ways you are eligible to save on your taxes! If you need more personalized service or have questions, give me a call. Debra Newby Watkins, CPA, 512 484 8016.
The general rule is to always take a deduction (pay your property taxes) every year. However, if the total of your itemized deductions is below the standard deduction available to you, “Doubling-up” on your property taxes can afford you a way to keep your standard deduction. Doubling up means paying two years of property taxes at once and then skipping a year.
For example: Suzii is a single taxpayer whose actual property taxes are $6000. She does not donate to charity. As a single person, her standard deduction for 2015 is $6,300. This means, if she has no itemized deductions, she can still reduce her taxable income by $6,300. If she pays her taxes in December, she loses that deduction because her property taxes are less than the standard deduction.
However, if she pays her 2015 taxes in January 2016 and her 2016 taxes by December 2016, her itemized deductions on her 2016 return will exceed the standard deduction and she will get the benefit of an additional reduction of $5,700.
If funds to pay your taxes are held in escrow by your mortgage company, make sure to instruct the company on when they should be paid. Every year check to see if the equity in your property exceeds 20% of the home’s value. Once you reach this mark, the mortgage company can no longer require you to escrow funds and must release any money held in that account to you. You will also by released from making mortgage insurance premium payments.
When purchasing a new home, do not depend on the title company to file your homestead exemption with the appraisal district. Always verify that you are receiving that exemption, as this will affect your property taxes.
As part of the homestead exemption, any 65 year old home owner who lives in the residence, may have their property taxes frozen, If the qualifying homeowner dies, the surviving spouse may continue to receive the exemption if the surviving spouse is age 55 or older at the time of death and lives in and owns the home. This requires an application for the exemption to continue.
There are other exemptions available to disabled persons and veterans, which may also help as you assess the best way to pay your property taxes. For more on these topics visit:
Keep in mind, that no matter how you choose to finance your property taxes, they are an important part of home ownership and it pays to know all the facts in order to best utilize your money. Have questions? Contact me, Debra Newby Watkins, CPA at 512 484 8016.