September 17, 2019

HIDDEN TREASURE AWAITS YOU!

Tax day is just around the corner, and many homeowners forget that they’re sitting on a wealth of potential savings — in their home. Tax deductions for homeowners are plentiful, so keep these guidelines in mind as you prepare your return this year.

First, know that if you deduct home expenses, you have to file form 1040 (also known as the long form) and itemize your deductions on Schedule A. While it can be a headache, the rewards are usually worth it.

Remember that the mortgage on your home is deductible — at least the real estate taxes, qualifying interest and premiums, for a loan up to $1 million, according to the IRS. Note that fire or homeowner’s insurance premiums and the principal mortgage amount are not deductible. Here’s how to calculate what’s deductible: Enter your total real estate taxes for the year, and enter the number of days in the property tax year that you owned the property. Divide the number of days by 366, and multiply that number by your total real estate taxes for the year.

Paid off your mortgage early? The prepayment penalty you might have received is tax deductible as home mortgage interest, as long as it’s not for a specific service performed or a cost connected with your mortgage loan.

You may have heard that home repairs can qualify for tax deductions, but home improvements are the real winners. An improvement is classified as anything that adds to the value of the home — for instance, making a room handicapped accessible or adding a deck to the back of your home. Always keep receipts and records — and remember, if you borrowed money for that improvement, the interest on the loan is tax deductible, just as it is with the mortgage payments.

Another item many homeowners forget is deductions for loan origination fees, better known as “points.” One point is equal to 1 percent of your loan. Depending on how many points you’ve accumulated, you may be eligible to deduct them. There are rules about deducting points, but a financial professional can help you sort through them.

And finally, don’t forget that if you upgraded to energy-efficient Energy Star windows, stoves or water heaters, those may be eligible for a tax credit. Check www.energystar.gov to see if your improvements are included.

Change in the Real Estate Excise Tax (REET)

SB 6424 and HB 3179, which would expand uses of local real estate excise tax, could be voted on in either the House or Senate as soon as today. Please contact your legislator IMMEDIATELY and ask them to vote NO. Senate members will be voting on SB 6424, House members will be voting on HB 3179.Send a letter to the following decision maker(s):
Your Representative (if you live in Washington)
Your State Senator (if you live in Washington)

Below is the sample letter:
Subject: Preserve Infrastructure – Vote NO on SB 6424 and HB 3179

Dear [decision maker name automatically inserted here],

Please oppose SB 6424 and HB 3179. These bills would expand the allowed uses of the local second .25% real estate excise tax.

This additional tax on home sales was adopted with the commitment that it would be dedicated to provide infrastructure necessary to implement the Growth Management Act. Now, local governments are seeking to divert this funding for operating expenses or for public buildings that can be funded through bond authority or other mechanisms. The real estate excise tax is a volatile revenue stream that is ill-suited for operating expenses, and other funding options exist that are not being utilized by local governments.

Diverting local REET revenue from basic infrastructure means fewer construction projects that create jobs and tax revenue, and undermines the ability of local governments to accommodate growth as required by the Growth Management Act. Please vote NO on SB 6424 and HB 3179.

IT IS TIME TO DO YOUR HOMEWORK

Are you aware of the current tax breaks for which you may qualify?  There are special 2009 benefits for energy saving home improvements (windows, heat and cooling source and appliances) . . . first-time home Buyers and move-up home Buyers . . . plug-in electric drive conversion kits . . . new vehicle sales tax.