Nothing quite compares to the excitement of buying your first home. Transitioning from renter to homeowner can imbue people with a tremendous sense of accomplishment and serve as an integral step on the path to maturity. However, as any seasoned homeowner can attest, houses represent sizable investments, and for most people, their home is the most expensive purchase they’ll ever make. That being the case, cost-conscious homeowners should take measures to save money whenever possible – particularly during tax season. If this will be your first time filing taxes as a homeowner, you’ll be well-served by the following pointers.
When working to save as much money on your taxes as possible, staying organized is vitally important. This means saving and meticulously filing every receipt, financial document and piece of paperwork that pertains to maintaining your home. The more organized you are, the better equipped you’ll be to take advantage of various write-offs, deductions and rebates, so take care to create a simple and convenient filing system for all home-related records. For maximum effectiveness, practice good organization year-round instead of scrambling to find pertinent documents right before taxes are due.
Educate Yourself on Homeowner Exemptions
Depending on the state you reside in, you may qualify for a homeowner exemption or homestead exemption. These exemptions can effectively lower your property tax bill through decreasing the assessed value of your home. It’s important to note, however, that qualifications vary wildly from state to state. Many states make homeowner exemptions readily accessible to senior citizens, military personnel, people with disabilities and homeowners whose income falls below a certain threshold.
Consider Home Office Expenses
If you regularly telecommute or do a fair amount of work from home, you may be eligible to take advantage of various home office write-offs. However, in order for you to qualify for these write-offs, your home office will need to meet certain criteria. For example, your home office must be used exclusively for business purposes and be wholly separate from other areas of the house. This means your kitchen, living room or bedroom cannot be regarded as home offices, even if you conduct most of your business from these locations. Ideally, your home office should be a clearly defined area – like a room or set of rooms.
In order to enjoy the benefits of home office write-offs, your workspace will need to pass three separate tests: exclusive use, regular use and principal place of business. Exclusive use means the office is used for no purposes other than work. Regular use means that the area is used on a regular basis – i.e., at least several hours a day. A home office that’s used once in a blue moon will not entitle you to write-offs. Lastly, for your home office to qualify as your principal place of business, it must either serve as the principal location of a business or be a place where you frequently meet with clients.
Moving Expenses May Not Be Deductible
Moving generally isn’t an inexpensive affair. Depending on how far you’re moving and how much heavy lifting is required, you may be on the hook for a princely sum. Since many homeowners were able to deduct moving costs under the old tax rules, this process wasn’t always a financial strain. However, anyone planning to deduct moving costs under the current rules may be in for a surprise.
These days, most moving expenses are no longer deductible, with military-related relocations being the primary exception. So if you’re an active-duty member of the armed forces or your relocation is pursuant to an order, there’s a good chance your moving expenses will be deductible.
Buying your first home can be a tremendously rewarding experience. For many adults, being handed the keys to a brand new house represents the culmination of copious dedication and hard work. However, as any seasoned homeowner can attest, a house is a long-term investment. In addition to monthly mortgage payments, you’ll be expected to foot the bill for assorted repairs, renovations and other upkeep-related endeavors. As such, whenever you come across an opportunity to save money, you’d be wise to take it. Homeowners looking for effective ways to make tax season less stressful will be well-served by the previously discussed tips.