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With just over two weeks remaining in the year and the holiday rush upon us, income taxes may be the last thing on your mind. But property owners would be smart to check their to-do lists twice to make sure they get the maximum homeowner tax benefit from the IRS in 2015.
The good news is that 2014 looks an awful lot like 2013 in terms of tax policies affecting homeowners?nothing has really changed. Forbes spoke with two CPA financial planners, Jerry Love of Abilene, Tex., and Michael Schulman of Central Valley, N.Y., who offered the following suggestions homeowners might want to consider as they close out the year.
1.?Pay your property taxes early. In states where property taxes are due in multiple chunks, it may make sense to pre-pay next year?s first installment before this year ends. This is especially the case for people expecting their incomes to go down in 2015. Just be sure that your mortgage company allows for pre-payments. ?If [property tax payments] are being done through your escrow account, you may not have any control over that at all,? notes Love.
2. Accelerate mortgage payments. Following the same logic, it may make sense to push January?s mortgage payment into December so that you can accelerate that interest deduction in the current year. Just writing a check on Dec. 29 isn?t a guarantee that?the mortgage company will cash?or count?for in 2014. ?Absolutely communicate with the mortgage company on when the mortgage company needs to receive it to count it for the current year,? Love notes. ?Because if it?s not on that form 1098, it?s going to be difficult to get the deduction.?
3. Consider bunching deductions. Now is the time to plan ahead in terms of itemizing versus standard deduction, for both this year and next, notes Love. In some cases, it may make sense to switch off between these two strategies. For example, consider a married couple, who for 2014 have a standard deduction?of?$12,400. Let?s assume that in 2013 they had itemized deductions worth $7,500, meaning it would make more sense for them to take the 2013 standard deduction (then $12,200). ?But let?s say that $5,000 of that $7,500 is their property tax,? says?Love. He would have advised such a couple to take the standard deduction for 2013, and then to pay their 2013 year-end property taxes in January 2014 and their 2014 taxes in December, in order to create a total ?property tax for 2014 of $10,000.? Add in $3,000 in about charitable donations and suddenly this hypothetical couple?would want to itemize. Again, this kind of bunching requires planning ahead. ?If someone were starting that strategy, they would be looking at their property tax and saying I need to not pay my property tax in December, I need to pay in January so I could have two in 2015,? Love says.
4. Watch the tax extender bill. In early December?the House?passed the ?Tax Increase Prevention Act of 2014,? which extends energy credits for windows, as well as?energy-efficient building envelope components including insulation, exterior windows (or skylights), exterior doors and some roofing materials, among other items. The measure has not yet made it through the Senate.?Just make sure all this has shaken out?before taking advantage of the expected extensions.
Other homeownership-related aspects of tax time don?t necessarily need action steps now, but may be a bit confusing. Here are some items you can?t do anything about, necessarily, but want to understand before you visit the taxman or file on your own.
Read More at Forbes.
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