As if buying a home, selling a home or being a homeowner is not stressful enough, filing taxes with any of this on your list of financial things you did in 2015 makes tax season a bit more stressful. Many taxpayers forget that there are a few special circumstances in place not only for homeowners who did not move throughout the year, but for those who bought homes and sold homes. It’s even more complicated if you do that for a living and have numerous homes to your name. If you are not careful and make some of the most common real estate tax mistakes around, you could end up in trouble with the Internal Revenue Service.
Deducting your escrow amount
Most of us have an escrow account in which a portion of our monthly mortgage payment is placed so that when it comes time to pay our property taxes and our insurance, our mortgage company can do that on our behalf. Unfortunately, some people think you can deduct all the money in that account, but you cannot. You may only deduct your taxes as much as the bill states your taxes cost. The rest is merely overages.
We don’t even like to mention this one, as we think you should put down enough money on a house not to have to pay Private Mortgage Insurance. However, we know so many people do not use a down payment. A blog on eXp Realty talks about how you can deduct the cost of your PMI at tax time, and it can save you a bundle if you don’t forget to include this in your taxes. However, you cannot qualify for all of it based on your income level.
Tax year and tax bills
You have to be very careful that you deduct your property taxes for the actual tax year. What do I mean? We pay ours a year in advance. So when we pay our taxes at the end of 2015, it’s for 2016. You may only deduct the property taxes you paid in that year. This means being very careful to ensure your tax bill matches the year of the taxes you are filing for the year.
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