Millions of people buy real estate each and every year but many rookies are making simple yet costly mistakes. Real estate tax can be quite complicated to understand but if owners don’t know a few basic errors to avoid, they could foot a costly bill. The following are just seven basic rookie mistakes to avoid today.
Trying To Get the Escrow Balance Deducted In Full
One of the simplest rookie real estate tax mistakes owners can make is to try and get a full balance deduction. This is simply not going to happen. You cannot write off your entire escrow balance and you aren’t going to be able to get a break on the taxes either. Everything has to match the original bill and if not then you may find yourself up for an audit. This is never something you want so it is much better to get things right and stay on the good side of the government.
Forgetting PMI Should Be Deducted
Private mortgage insurance payments or PMI, are something few enjoy but some of these payments can be written off or deducted with your tax returns. Some of your real estate taxes may be reduced slightly as long as you claim for them. Unfortunately, some people seem to forget these payments can be written off on a tax return and end up missing out. You can get a vast majority of the payments written off or if you’re lucky enough the entire amount.
Energy Efficient Upgrades Forgotten
Rookies don’t always know the latest additions to the tax laws and that can often cause them a few troubles. However, some rookies don’t realize they can claim for certain things too. For those who are looking to upgrade to green energy or add energy efficient measures into the property, they can make some deductions. This is often missed however when it comes to real estate tax.
No Record of Your Expenses
If you are listing a host of deductions you might find the government wants to see records of legitimate expenses. However, rookies often don’t keep a track of what money is going into the property and out; and this isn’t a good idea. Real estate needs to have a solid paper trail in order to ensure everything is above board and legit. See more here: http://talkingbackwards.realestatetheband.com
Deductions with Home Offices
There are thousands of people who think since they work for home, they are able to have some real estate tax reductions but unfortunately, they are sorely mistaken. When it comes to claiming certain deductions there are strict rules and guidelines that must be followed. For instance, the property must be used as an office or used solely for business; if this isn’t the case your deductions won’t count. This is sometimes complicated but the fact is real estate tax can only be used as a true deduction if it is used for business purposes only.
Home Improvements Are Not Legitimate Deductions
There are differences between home repairs and home improvements when it comes to deductions. Now, most people don’t see many differences between them but this often causes several errors. Real estate tax rules are quite strict and essentially it comes down to what is concerned necessary and what is considered cosmetic. Home improvements are technically cosmetic and not in fact legit deductions and even though they do add value to the property they aren’t deductible. Home repairs, on the other hand, are legitimate deductions.
Claiming For the Wrong Year
If you were to buy property in 2016 the real estate must be added to that year’s tax returns and not the previous year’s. This is something thousands of property owners seem to forget but they could land in some serious trouble if they don’t get it right. You may think it doesn’t matter but it can and unfortunately this is something rookies end up making a mistake with.
Don’t Make Real Estate Tax Mistakes
Real estate taxes are quite difficult to understand because it’s a vast area. However, if you make a mistake or two then it can end up costing you thousands. You could miss out on claiming for certain deductions or end up paying out more than you should. Real estate tax law is complicated but don’t sit back; brush up and avoid the rookie mistakes.