I recently came across an article presenting some myths and facts about home taxes. As an experienced lender in the Kansas City area, I have received many of these same questions. While it’s always important to consult your own tax adviser about these issues, here are a few points of the article that I thought may be helpful to those beginning to navigate home taxes.
Will I get a huge tax credit as soon as I buy a house?
While there is a home ownership tax benefit, it is not a credit. The tax benefit lets you include your home real estate tax and interest in itemized expenses. Because these items are usually quite a bit of money, it may be more beneficial to itemize instead of claiming a standard deduction. If you purchased your home late in the year, you may need to wait until you have a full-year expenses to benefit from itemizing. Be sure to work with your tax adviser to calculate your best move in this situation.
Can I write off my property tax if I work from home?
If you have a home business, you may be familiar with filing a business Schedule C or other “Business Use of Home” form, which allows you to write off or reduce you income for some of your expenses. The article uses the following example:
If you have ten rooms and you use one for your office, you may be able to claim 10% of your property tax and other home expenses as part of business expense. This reduces your earnings from the business, making your overall adjusted gross income lower, so your income taxes may be lower.
Will I have to pay property tax when I buy my house or will I get a bill at the end of the year?
The bill you will probably receive at the end of the year will be for the following year’s taxes. You will most likely have to pay property tax for the portion of the current year that you will own the home at closing.
Again, a tax adviser will help you through these and other questions surrounding home taxes. If you need a reference for a qualified tax adviser in the Kansas City area, or have questions about the lending process, please don’t hesitate to contact me.