Spring is often a time when everyone has taxes at the top of their mind. For some, this can mean making final payments while others will be looking forward to receiving a nice refund check. Whatever your situation may be, one thing we all have in common is we all have to pay taxes. Here are 6 ideas that you can begin doing now so that you can take full advantage when you are preparing your next return.
Home Office – If you don’t have a home office that you work from, you might want to invest in creating an actual home office. Creating an office allows you to take a deduction in various ways. You can do the simple method of $5 per square foot or you can do a percentage of your home’s electric bills and expenses. However, you must use the room regularly and exclusively for work as well as tabulate your expenses by keeping receipts.
Solar Panels – This is one of the few credits left that available to homeowners. “You can take a credit of up to 30%, with no cap, on the equipment and installation costs of solar energy panels and solar water heaters you purchase in 2017,” says Jacob Dayan, partner and co-founder of CommunityTax.com. This equipment must be used to heat water or power your primary or second home and cannot be used for a luxury item like a pool or spa.
HELOC for improvements – If you are thinking of building an addition or doing a bathroom remodel, consider taking out a home equity line of credit. The interest is tax deductible which means that the upgrades can get a lot cheaper.
Home Improvement Receipts – Be sure to keep detailed records of improvements that you make to your home. Significant improvements like a kitchen remodel, new roof or furnace can be used against your capital gains taxes you may pay when you sell the home.
Pay Property Tax early – This can work to your advantage for whichever year you may be looking for a larger deduction. For example, you may receive a tax bill in December being due in late January. Pay it in December if you need a large deduction for that year, or pay it in January if you forecast needing a larger deduction in the following year.
Pay Points – If you plan on buying a home this year or refinancing, then you could save on taxes in terms of points. Points are also called loan origination fees or discount points which is essentially prepaid interest on the loan. If you are buying a home, then you can deduct them the year you make the purchase of the home. If you are just refinancing, then you can deduct them over the life of the new loan.