Issue link: https://www.ifoldsflip.com/i/1354192
By Erik J. Martin CTW FEATURES Theturnof thecal- endaryearmayhave come andgone,but it's never too earlyto makeaNew Year's resolution—especially onethatcansaveyou money.Andifyouown ahome,youmaybe leavingmoneyonthe tablethatyoucould otherwisedeductfrom yourtaxes. That'swhyitpaysto understandeverytax write-offyou'reeligible forandstartkeeping goodrecordsthatcan substantiatewhatever you claimon yourtax return. "It'salwayshelpful tomakesureyouare maximizing specifictax benefits.Everysitua- tionisdifferent,but often thereareoptions toconsider prior to year-end,afterwhich it's too late,"saysJes- sica Distel,director of businessservicesfor BuckinghamAdvisors inWesterville, Ohio. In otherwords,the deadlinehasprob- ablypassedtoplan forwrite-offs,deduc- tionsandcreditsthat you can claim on your 2020 taxreturndueto the IRS thisApril. But there's plentyoftime left inthisnewyearto figureouttaxsavings you'reeligible toclaim in2021. "It'simportantto reviewyour eligible taxdeductionsinad- vanceof theApril 15, 2022,taxdeadlineto makesureyouarenot missing anydeduc- tionsyouarelegally entitledtoandtoavoid anysurpriseswithan increasedtaxbill,"ex- plainsNewYorkCity- basedtaxaccountant ArielGamburg. John Blake,apart- nerwithKlatzkin, a Hamilton,NewJersey- headquarteredac- countingandadvisory firm, saysthisstrategy isparticularlyimpor- tantfortaxpayersand home-basedbusiness ownerswho follow cashbasisaccount- ing,which recognizes expensesandrevenues at thetimecashispaid outorreceived. "Beingacashbasis taxpayeressentially meansthatanypos- sibletax-savingactions would havetobedone byDecember31,2021," Blakeexplains. AccordingtoDistel, thegoodnewsisthat eligible homeowners maystillbeableto deductamountspaid thisyearforreales- tatetaxes,loan points, mortgageinterest, mortgageinsurance premiumsandIRS- approvedcharitable causes. Thebadnews?The TaxCutsandJobsAct (TCJA)of2017 some- whatlimitsyour ability tomaximizetaxdeduc- tions. "With thechanges tothetaxcodetak- ingeffectthreeyears ago,mosthomeown- ers—especially mar- riedcouples —don't getasmanyfederaltax benefitsasinthepast forhomeownership," Gamburgadds."For instance,deductibility ofthehomemortgage interestexpensewas reducedonnewmort- gageswith a$1mil- lion mortgagebalance to$750,000.Andthe realestatetaxdeduc- tionisnowlimitedto $10,000,which in- cludesstateandlocal taxes.This,coupled with thefactthatthe standarddeductionis nowsetat$24,800for marriedcouplesfiling jointly,mostmarried taxpayersneedtheir mortgageinterestex- penseandcharitable deductionstoexceed $14,800 toreceiveany federaltaxbenefits." Blakenotesthat thesechangeshave causedmanytaxpayers toswitchfromitem- izingdeductionsto takingthestandard deduction,especially thoseindividualswho havebeenaffectedby theTCJA. Unfortunately, salariedemployeeswho havebeenforcedto workfromhomedueto thecoronavirus aren't eligibleforanyspecial deductions. "However,youcan ask youremployer toreimburse certain expenses incurredfor workingfromhome, possibly,forinstance, higherutilitybills; generally,thesereim- bursements are not taxable incometoyou," Gamburgsays. If youare working fromhomefor yourself as asoleproprietoror small-business owner, youcanalso stillclaim ahomeofficededuc- tionif propercondi- tionsare met. "Ifyouhaveahome- based business and useaportionofyour houseexclusivelyfor thatbusiness, youcan deductaportionof house-relatedexpenses againstyourbusiness," Blakesays. Sayyourhomeoffice comprises 10 percent ofthesquare footage insideyourhome.In thiscase, youmaybe able todeduct10per- centofmanyofyour home'sexpenses with carefulrecord-keeping. "Some of the costs that you are allowed to deduct include a portion of real estate taxes, a portion of mortgage interest, a portion of homeown- ers insurance, a por- tion of utilities, and other expenses that may directly impact the office space. Even to some extent, home improvements that are done to the house's overall exterior could be subject to a pos- sible deduction," Blake notes. Again,forbestre- sults, startearly and thinkforward. "Oneofthebest waystomaximizeyour taxdeductionsis to plan aheadfor item- izeddeductionssothat youcanspendmore onneededexpenses in aspecificyear,which canthengeneratea higherdeduction,"says GeorgeBirrell, aCPA and founder of TaxHub inNewYorkCity."You can also holdoffon certainexpenses until you decide you want to itemize foragiven year,thereby maximiz- ingthe value of that deduction." Lastly,thinkabout recruitingan expert who can helpyou plan forand claimeverytax write-offyou qualify for. "Getting sound tax and accounting advice from an experienced accountant or tax planner can yield great benefits," Distel sug- gests. Areyouatax-savvyhomeowner? 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