From incentives to deductions, taxes are complicated and can be confusing even for the seasoned property owner. Understanding the ins and outs of some common property tax concerns can help save you money and put your mind at ease. Below Mary Lynn Stone, President of Century 21 New Millennium discusses three common tax topics.
1. Natural Disaster Relief
“If your home is affected by a natural disaster, your damage costs will be deductible from both state and federal income taxes,” says Stone. Disasters include fires, floods, earthquakes, hurricanes and more. “Homeowners can deduct their losses by filing an amended return for the tax year before the event happened. This helps to minimize the wait for refund money that can be used to make repairs or pay for living expenses,” Stone explains.
2. Historic Rehabilitation
“If your home is a certified historic home, then you may be able to receive a break in your taxes,” says Stone. Many states offer tax incentives, reductions and abatement programs for owners of residential historic homes. These programs are described on the National Trust’s website, which also offers resources and tips for owners of historic homes. Visit the site at www.preservationnation.org.
3. Home Improvement Deductions
“Many sellers ask me if they can deduct the cost of improvements made to their homes from their taxes,” says Stone, who continues to note that the answer is not black and white. “Yes, you can deduct improvements, but only after the home has been sold. This is because improvements add to the basis of your home,” Stone explains. “Because your basis is subtracted from your selling price to figure out what your home sale gain is, these tax deductions can only be made after your home is sold and your basis is defined.”
It is also important to note that the IRS has specific qualifications for what counts as a taxable “improvement.” These are renovations that add to your home’s value and extend its “useful life.” Stone cites taxable improvement examples including an extra bathroom or an updating plumbing, heating or electrical system.
CENTURY 21 New Millennium. Smarter. Bolder. Faster.
CENTURY 21 New Millennium, www.c21nm.com, is a full service real estate brokerage company specializing in residential and luxury properties. The Virginia locations are in Alexandria, Centreville, Culpeper, Fredericksburg, Gainesville, McLean, Stafford, and Woodbridge. The Maryland offices are located in Annapolis, Dunkirk, La Plata, Lexington Park and Lusby. Its core services include: mortgage financing, investing, settlement services, property management, property insurance, global relocation assistance, and commercial real estate.