tax season's impact on real estate

Tax Season’s Impact on Real Estate

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As April approaches, both seasoned investors and first-time buyers are discovering that the fiscal year’s timing often dictates their property goals. From utilizing tax refunds for down payments to navigating new deductions, tax season’s impact on real estate creates a unique window of opportunity and urgency. Understanding these seasonal shifts can help you leverage current tax incentives to maximize your investment.

Homeowner tax deductions.

Homeowners can reduce their taxable income by deducting mortgage interest, property taxes and costs associated with recent home improvements or refinancing. Sellers should also note the capital gains tax exclusion, which allows individuals to exclude up to $250,000—or $500,000 for married couples—of profit if they have occupied the home for two of the last five years.

Tax refunds and home buying.

If you plan to use your tax refund this year, it could provide a significant boost to your down payment fund or help cover closing costs and home inspections. It may also reduce your monthly mortgage payments, making homeownership more affordable.

Whether you use the funds to buy or simply bolster your moving-day reserves, your tax return is a powerful tool to help you transition from renter to homeowner this spring.

Selling a home during tax season.

Listing your home during tax season is a strategic move, as many motivated buyers are currently looking to reinvest their tax refunds into a down payment or closing costs. This influx of seasonal capital often leads to a more active market, potentially resulting in quicker offers and more competitive bidding.

By timing your sale to coincide with this season, you can capitalize on tax season’s impact on real estate with a pool of prospects who have the financial boost they need.

Investment property tax deductions.

For real estate investors, tax season provides a prime opportunity to maximize returns through deductions for mortgage interest, repairs and property depreciation.

Tax filing and mortgage applications.

Lenders typically require your last two years of tax returns to verify income stability and determine your eligibility for favorable loan terms. Keeping these documents organized and accurate is especially vital for self-employed buyers looking to prove their financial strength during the mortgage application process.

Summary

Whether you’re a first-time buyer or a seasoned investor, staying informed about tax season’s impact on real estate is the key to making smarter financial decisions. Navigating these seasonal shifts can feel complex, but you don’t have to do it alone. Continue reading LCAR blogs for the latest real estate tips and news to ensure you’re always one step ahead in the market.

potential homeowner tax breaks for 2022

5 Potential Homeowner Tax Breaks for 2022

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The due date for taxes is April 18, 2023. But before you file, be sure you are aware of the tax perks of homeownership. Check out these five potential homeowner tax breaks for 2022.

Mortgage interest 

The mortgage interest deduction is an itemized deduction. This means that for it to work in your favor, all your itemized deductions need to be greater than the standard deduction.

Note that for the 2022 tax year, those standard deduction amounts increased. For individuals, this deduction is now $12,950, and for married couples filing jointly, it is now $25,900. For the head of household, this deduction went up to $19,400. And if you are 65 or older, you can add on an extra $1,400 per person if you are married and filing jointly or an extra $1,750 if you are a single filer.

And remember—the more recent your mortgage, the greater your tax savings will be.

Property taxes

Property taxes are on that itemized list of all your deductions that must add up to more than your standard deduction.

Taxpayers can take one $10,000 deduction. This deduction is capped at $10,000 for those who are married and filing jointly.

Note: If you have a mortgage, your property taxes are built into your monthly payment.

Interest on a home equity line of credit

If you have a home equity line of credit, or HELOC, the interest you pay on that loan is deductible only if that loan is used specifically to “buy, build or improve a property.”

Essentially, you will have some cash if your home needs repairs or upgrades. But you cannot use that money for things such as weddings or college tuition.

You can deduct up to the $750,000 cap—this is for the amount you pay in interest on your HELOC and mortgage combined. But note, if you took out a HELOC before the new 2018 tax plan for anything other than improvements to your home, you cannot deduct the interest.

Home offices

Are you self-employed, with your home office being your principal place of work? Good news! You can deduct $5 per square foot, up to 300 square feet, of office space. The maximum deduction your home office can receive is $1,500.

For those taking this deduction, know that there are very strict rules on what constitutes fully-deductible home office space.

In addition, understand that if you are still working remotely, you are still a W-2 employee and are not eligible for this deduction under the CARES Act.

Home improvements

To receive the home improvement tax break, your improvements have to exceed 7.5% of your adjusted gross income.

Deductible improvements can include widening doorways, lowering cabinets, fixing electrical or adding stairlifts. For some homeowners who plan to add renovations such as wheelchair ramps and grab bars in the bathrooms, for example, the cost of improvements can result in a nice tax break.

You will need a letter from your doctor to prove that these changes were medically necessary.

Summary

Be sure you keep these potential homeowner tax breaks for 2022 in mind when filing your taxes in 2023. These breaks and homeownership tax perks can save you money!

Finally, continue reading our blogs for more real estate tips and news.