How to Prepare for Tax Season as a Homeowner

How to Prepare for Tax Season as a Homeowner

If you recently purchased a home, your taxes will be a little different this year. Fortunately, you likely qualify for a number of tax credits and reductions. However, to take full advantage of this opportunity, you must know what documents to bring to your tax appointment and how best to prepare during tax season.

Available deductions
Purchasing a house is a huge milestone. The search, the savings and the signing can all be very stressful. In the long run, it’s very much worth the investment. According to Forbes, three deduction benefits homeowners have access to include:

  • Mortgage interest
  • Property tax payments
  • Closing costs

Because a home is such a large expense, it really pays off when it’s time to do your taxes – especially in the first year of owning your home. Not only can you deduct the interest you’ve paid on your mortgage like all other homeowners, but you can also claim points or origination fees on your loan. These savings can really add up. In fact, the interest can be one of the largest tax deductions available.

Additional tax perks
When you own a home, you can also do a lot more with the improvement of the property. Some renovation projects and maintenance costs will actually work in your favor when it’s tax time. According to Energy Star, tax credits are available for energy-efficient appliances and purchases made for the home. So, not only do homeowners save energy and money throughout the year, but they also receive a tax credit.

Keeping track of all the documents is a must ahead of tax season.Keeping track of all the documents is a must ahead of tax season.

What to keep
While there are plenty of tax benefits available to homeowners, you won’t be able to access any of these perks without the appropriate paperwork. In addition, your tax situation will likely become more complicated after purchasing your own home. So informing yourself and knowing what to expect out of your new tax situation is critical.

HouseLogic noted that you’ll want to keep documents – like year-end mortgage statements, residential energy tax credit receipts and property tax payment records – three years after the due date of the return showing the deduction.

Home sale records should also be kept in a safe place for an extended period of time. Some documents you must keep include:

  • Deed to your home
  • Closing documents (including Closing Disclosure)
  • Builder’s warranty
  • Mortgage payoff statements
  • Receipts for any home improvements that increased the value of your property

These documents are important for a variety of reasons, and doing your taxes is one of them.

Stay organized
Simply keeping important documents is one thing, but organizing them in a manner that will facilitate finding critical paperwork when you need it is another. Invest in a filing cabinet that can hold all important documents and develop a color-coded or labeled system to keep everything in a proper place.

Owning a house is a substantial investment, and the homebuying process can be quite stressful. However, aside from owning property of your own, there are additional financial perks you can take advantage of when it’s time to do your taxes.

Make sure you stay organized throughout the year so you can find and bring appropriate documents to your tax preparer when the time comes. In doing this, you can reap the tax benefits of owning your own property.

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