Many Columbia SC homeowners have already filed their taxes for 2013, but a large majority have not. We direct this article to those of us who always seem to procrastinate until the last minute, and are lucky if we get our taxes filed by that dreaded April 15th deadline.
5 Important Tax Tips for Columbia SC Homeowners
Mortgage Interest
Claiming mortgage interest is the biggie, and one of the most common deductions among Columbia SC homeowners when figuring their taxes.
The deduction even covers multiple loans, so those who are Columbia SC homeowners but have a second home elsewhere can claim the interest on both, so long as the total is under the $1.1 million cap.
If you refinanced your loan and decided, "Hey, why don't we take another $50,000 out in equity," but then you don't use that money to, say, build a pool, or add a garage, that's not fully deductible. You have to use the money to improve the house, or you are not allowed a deduction for that.
Private Mortgage Insurance
Don't mistake private mortgage insurance, or PMI, for Columbia SC homeowners insurance that protects against a fire or other loss. PMI comes into play with lower-income Columbia SC homeowners who often can't afford a big down payment, and instead pay a small monthly fee as insurance against default. The idea is to protect the lender against being stuck with a big loan with zero equity in the home, as well as to allow those without huge nest eggs to buy a property with minimal down payments.
If you make a private mortgage insurance payment, in most cases this is deductible.
Cancellation of Debt
While foreclosures are not as common as they were a few years ago, debt forgiveness is still very common. If a lender agreed to forgive some (or all) of your mortgage debt, failing to report that debt forgiveness could result in a big change to your overall tax liability and result in hefty penalties from the IRS.
This also applies if you took out a home equity loan but are now having trouble making payments. Even if it's not the same as a foreclosure or a short-sale, if that second mortgage is written down by a lender then you have to report that when filing your taxes.
Casualty Losses
When disaster strikes you are able to claim a tax break for any significant losses not covered by your Columbia SC homeowners insurance policy.
The biggest "gotcha" when it comes to deducting losses is to make sure you can prove the loss and the value. Documentation is key when trying to claim casualty losses. And remember, it's out-of-pocket losses, and it has to be more than 10% of your income. So if you made $75,000, you have to pay $7,500 "out-of-pocket" before you can take any deduction.
Selling Your Home
For Columbia SC homeowners who have taken advantage of a resurgent housing market by selling their homes altogether, there are also tax implications.
If you sold your home in the past year, costs including title insurance, advertising and real estate broker fees can be claimed on your taxes.
You can also claim certain repairs to reduce your capital gains on the sale, presuming they were made within 90 days of the sale and clearly for the intent of marketing the property.
And after the sale? If you had to find a new home because of a new job that is located more than 50 miles away from your old home, you may be able to deduct your reasonable moving expenses, too.
So as you can see, Columbia SC homeowners do get some substantial tax breaks. Get more tax tips by clicking the Taxes link to your right under Columbia SC Real Estate Categories.
If you bought a home or refinanced your home in 2013, mortgage points you paid on the new loan are tax deductible. But depending on whether you purchased a home last year, or simply refinanced the one you already had, when you can deduct the mortgage points varies, as explained in this brief video…
Check out our other articles and tips pertaining to Mortgage points and mortgages in general by clicking on the Columbia SC Mortgage Info link to your right under Columbia SC Real Estate Categories.
Though we're more than a month into 2014, there are some 2013 tax credits you may still be qualified to take on your taxes when you start preparing for last year.
If you replaced a furnace, air conditioning unit, or water heater, you may be eligible to get tax credits on your 2013 taxes you'll be filing before April 15th.
2013 was the last year you could claim these energy efficiency saving deductions, but they are a way to get up to 500 dollars back from the government.
Here are the things you need to know to get tax credits if you replaced a furnace, heat pump, air conditioning unit, or a water heater in 2013.
Taxpayers who purchased qualified residential energy-efficient property may be eligible for tax credits.
The credit is equal to the full cost of the equipment up to the following caps:
- Advanced main air circulating fan: $50
- Natural gas, propane, or oil furnace or hot water boiler with an annual fuel utilization rate of 95 or greater: $150
- Electric heat pump water heater with an energy factor of at least 2.0: $300
- Electric heat pump which achieves the highest efficiency tier established by the Consortium for Energy Efficiency: $300
- Central air conditioner which achieves the highest efficiency tier established by the Consortium for Energy Efficiency: $300
- Natural gas, propane, or oil water heater which has either an energy factor of at least 0.82 or a thermal efficiency of at least 90 percent: $300
- Biomass stoves that use "plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers": $300
Here's the tax form you need to complete in order to get your 2013 tax credits available to you.
Get more information on Taxes by clicking the Taxes link to your right under Columbia SC Real Estate Categories.
Dozens of tax breaks expired on January 1st. Columbia SC homeowners may have to do without some of these when they prepare their taxes next year, unless some or all of these deductions and breaks are retroactively extended by Congress. No one can confidently predict what will happen with restoring some or all of these deductions. The situation is further complicated by the fact that Congress and the Obama administration want to accomplish major tax reform in 2014.
Expiring Tax Provisions of Most Importance to Columbia SC Homeowners
Mortgage Insurance Premiums Deduction: Since 2007, qualifying Columbia SC homeowners have been able to deduct premiums for mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, the Rural Housing Service, and private mortgage insurance. Columbia SC homeowners whose incomes are not too high can treat such payments the same as mortgage interest payments. Unless the law is extended, no deduction will be allowed for amounts paid or accrued after Dec. 31, 2013.
Discharge of Indebtedness on Principal Residence: Since 2008, Columbia SC homeowners have been allowed to exclude from their taxable income up to $2 million of debt forgiven on their principal residence by a lender in a short sale, mortgage restructuring, or forgiven in a foreclosure. Unless this provision is extended, the exclusion will not apply to indebtedness discharged after 2013. If this provision does expire, the impact will vary from state to state.
Tax Credit for Qualified Energy Efficiency Improvements: Columbia SC homeowners have been able to claim a maximum lifetime tax credit of up to $500 for installing energy efficiency improvements in their main homes, including the cost of insulation, windows, doors and roofs. The credit expired at the end of 2013.
Credit for Construction of New Energy-Efficient Homes: Since 2006, certain contractors have been allowed an efficient-home credit of $1,000 or $2,000 for constructing or manufacturing qualifying energy-efficient homes. Like the other energy efficiency deductions, this expired at the end of 2013.
Many of these provisions are quite popular and likely will be extended by Congress. Exactly when or how lawmakers will get around to doing this is unclear.
Check out our other articles and tips on taxes that affect you as a Columbia SC homeowner by clicking on the Taxes link to your right under Columbia SC Real Estate Categories.
As we all prepare for the holidays, there is another major item creeping up on us. Tax time is fast approaching once again, and we have some year end tax moves and suggestions you should start thinking about now, even while you're thinking about the holidays.
Check out our other articles and tips on tax moves to be considering now by clicking on the Taxes link to your right under Columbia SC Real Estate Categories. We'll keep you informed on any breaking news that might affect your Taxes right here at our website.