Everyone knows that owning Vero Beach real estate offers significant tax advantages. A recent survey of people who had bought homes in 2012 showed 79 percent said the mortgage interest and property tax deductions were "extremely important" factors to their decision to become homeowners in the first place.
These two deductions are just the tip of the iceberg of all the real estate-related tax guidelines, advantages and dis-advantages.
Vero Beach Real Estate Moves That Trigger Surprising Tax Issues
Homeowners have been on a refinancing spree this year, spurred by continually low interest rates and a new resurgence in home values and equity. When you refinance into a lower interest rate mortgage than you previously had, the focus tends to be on the fact that your monthly payment is lower or that you can pay your home loan off faster with the same payment every month.
What many fail to calculate for is that the tax deduction based on your mortgage interest is the largest tax perk of home ownership. Most homeowners are eligible to deduct 100% of the interest they pay on a mortgage up to $1 million on their primary residence. So, if you reduce the interest you pay, you also reduce your mortgage interest deduction.
Believe it or not, less than 30 percent of homeowners take their mortgage interest deduction every year. This is thought to be because at lower income and home price levels, the standard deduction is higher than the itemized deductions for which many homeowners would be eligible. If you do itemize every year and/or you have a relatively high (or growing) adjusted gross income, you might be surprised at your tax bill the year after you refinance to a lower interest rate.
When you remodel your home, whatever you do, save your receipts. And this is not a 'save them until tax time' recommendation, it's a 'save them until you sell the place' mandate! The money you invest into improving your home over time gets added to your purchase price, or cost basis, when you sell, bringing down the amount the IRS considers to be profit or gain and reducing your chances of incurring capital gains tax. (Single home owners can realize $250,000 of "gains" above the cost basis of their home tax-free; marrieds, $500,000.)
Many remodeling projects popular with homeowners these days trigger local and state tax credits. If you are remodeling and improving your home's efficiency at the same time, visit your state, county and city websites to see what tax credits or other financial incentives you might qualify for.
Whether or not your remodeling projects are eco-friendly, if you use a home equity line to finance them, chances are good that you can deduct the interest from that loan (up to $100,000) on top of your home mortgage interest deduction.
There are many Vero Beach real estate moves that may affect your taxes if you own your own home, so be sure to consult with your accountant or tax attorney, or do a lot of research and study on this topic yourself. The money you save in taxes could blow your mind. But the money you give to Uncle Sam if you don't do your homework, can blow your budget.