There are a number of common mistakes homeowners make on their taxes each year. And with all of the changes that have recently occurred, homeowners and investors are even more likely to make a mistake than they had been in years past. Learn more about the deductions available to you, what you’re entitled to and what you need to watch out for in our latest post!
When filing your taxes for 2018, there are a number of new things homeowners need to be aware of. While the laws are ever-changing, many new policies have recently gone into effect. Investors need to be diligent that their forms are filed correctly, and that they are capitalizing on the deductions available to them. You don’t want to find yourself overpaying or not paying enough, causing you trouble down the road. Below, we discuss four of the most critical mistakes homeowners are making when it comes to filing their taxes for 2018 in Chicago.
#1 – Can No Longer Deduct Moving Expenses
Previously, you were able to deduct moving expenses when relocating to a new home that was over 50 miles away. As of 2018, you are no longer able to deduct your moving expenses no matter how far away you are going, but there are some alternatives. This change has a huge impact on people who are moving a long way. Moving trucks, traveling costs, storage, and many other expenses of relocating can add up to thousands of dollars that you will, unfortunately, have to pay taxes on. People all over the country had previously advantage of deductible costs when making state to state moves. Today, this deduction is only available to people who serve in the US Armed Forces.
#2 – Property Taxes And Mortgage Interest Deductions
These deductions are now capped. The deduction you are able to take for your state, local and property taxes is now capped at $10,000. If you are married and filing separately, this number drops down to $5,000. You must be the homeowner in order to pay the deduction. If you help out a friend or family member with their property taxes, the amount is not deductible as the taxes are levied on you. If you are taking care of someone else’s bills in their entirety, there is still a small deduction available, but you can no longer get the dependent credit of years past. The interest you pay for your mortgage is deductible as long as the debt is less than $750k. Previously, this amount had been 1 million. In addition, you are also able to deduct any mortgage points paid and the insurance premiums you pay for the house every year. This is the upside to paying interest on your outstanding loans… at least it’s deductible!
#3 – Exclude Your Gains
Here’s a good one for people who have recently sold a property at a profit. You are now able to exclude up to $250,000 of your property gains and up to $500,000 if filing jointly. We have met many people who have held on to an unwanted property, simply because they didn’t want to deal with capital gains taxes. Most of these people made less than $250k or $500k, and would not have to worry about paying the taxes in the first place. While many people fret over the thought of capital gains taxes, you will have to be making some serious profits in order to be affected. Plus, you can avoid these taxes when you choose to invest your profits into a “like-kind” investment, which actually covers a wide range of investment options.
#4 – Missing Write-Offs
Missing out on your deductions is like missing out on free money. As a Chicago homeowner, it’s important that you are capitalizing on all the deductions owed to you. Some common ones people might miss out on include medically necessary home improvements, solar panels, and other improvements made throughout the year. If you are a property investor, you will be able to write off your management costs, travel costs, and administrative expenses. You will also be able to deduct the fees for the professional services of lawyers, accountants, and property managers as long as their bills are solely for your investment property.
With all of the deduction changes, it is important to note that the standard deduction has nearly doubled under new tax laws. Single people are now able to deduct $12,000, whereas their deduction was only $6,500 in the past. Married couples who are filing jointly can now deduct $24,000, up from the $13,000 they could take in previous years. This means many more people are better off with the standard deduction as opposed to itemizing everything. If you haven’t had any significant changes over the past year, and if your taxes are low, the standard deduction will likely be right for you.