Tax Tips for Homeowners: Preparing for the New Year
As the calendar turns and tax season approaches, many Seattle homeowners begin to wonder what deductions and strategies they can leverage for savings. Whether you’re a first-time homeowner or you’ve been enjoying your home for years, understanding key tax benefits and meeting important deadlines can help you make the most of your real estate investment.
Mortgage Interest Deduction
One of the most significant perks of homeownership is the ability to deduct mortgage interest. For many homeowners, this deduction can result in substantial savings:
• Eligibility: Generally, you can deduct interest on the first $750,000 of mortgage debt if married filing jointly ($375,000 if married filing separately).
• Documentation: Look out for Form 1098 from your mortgage lender, which details the total amount of interest you’ve paid over the year.
Property Tax Deductions
Property taxes in Washington can be deducted up to a combined $10,000 limit for state and local taxes (SALT). Keep these points in mind:
• Local Deadlines: In King and Snohomish Counties, property taxes are typically due in two installments (April 30 and October 31).
• Payment Proof: Ensure you keep records of payments to claim the deduction accurately.
• SALT Cap: Remember the $10,000 combined limit for property, state, and local taxes if you itemize deductions.
Home Improvements and Renovations
If you’ve made energy-efficient upgrades to your home—like installing solar panels, updating windows or adding insulation—you may be eligible for certain federal tax credits:
• Energy-Efficient Home Improvement Credit: Covers part of the costs for qualified improvements.
• Save Receipts: Always keep detailed receipts and paperwork that show the date and type of improvement.
Home Office Deduction
Many Seattle professionals work from home, either part-time or full-time. If you use part of your home exclusively for business, you might be able to claim a home office deduction:
• Exclusive Use: The space must be used only for business purposes (even a portion of a room can qualify if it’s dedicated workspace).
• Regular Use: You must use the area regularly for business activities.
• Simplified Option: There’s a simplified square-foot method that can make claiming the deduction easier.
Capital Gains Exclusion
When selling your primary residence, up to $250,000 ($500,000 for married couples filing jointly) of capital gains can be excluded from federal taxes, as long as you’ve lived in the home for at least two out of the past five years:
• Qualifying Period: Keep track of your living situation to ensure you meet the two-year requirement.
• Renovation Receipts: If you sold your home for a profit, detailed records of renovations can help adjust your cost basis.
Washington State-Specific Considerations
• Property Tax Relief Programs: Washington offers relief or exemption programs for seniors, individuals with disabilities, and veterans who meet certain criteria. Check with your county’s assessor’s office to see if you qualify.
• Local Levies: Certain local or school levies can fluctuate property tax bills year over year. Monitor these to anticipate changes in your property tax obligations.
Important Deadlines and Documentation
1. Collect Forms Early: Expect your mortgage interest Form 1098, property tax statements, and any necessary 1099 forms in January or early February.
2. Filing Deadline: For most taxpayers, the federal tax filing deadline is April 15, unless it falls on a weekend or holiday. Double-check for any changes specific to the current year.
3. Extensions: If you need more time, you can file an extension (Form 4868), which typically gives you until October 15 to submit your tax return. However, any taxes owed must still be paid by the original deadline to avoid penalties.
Consult a Professional
Tax laws can be complicated, and the best strategies vary depending on your financial situation. While these tips are meant to give you an overview of potential homeowner-related tax benefits, always consult a qualified tax professional or CPA for personalized advice.
Need Help with Real Estate Questions?
If you have questions about buying or selling a home in Seattle, King County, or Snohomish County, or if you’re looking for local insights to maximize the value of your property, I’m here to help.
Contact Joe Sheldon
Phone: (206) 751-2223
Email: [email protected]
