Homeowners who want to save on tax money on their properties can follow some simple tips.
The year is nearing its end and soon it will be April which means it is time to pay taxes once again. For those who are unfamiliar with how real estate tax laws work, there are easy-to-do tips one can follow to legally cut down the amount of tax they are required to pay. And according to Realtor.com, a few tweaks go a long way in avoiding stress in paying taxes.
When selling homes, owners should take note that the rules are far more complicated if claims have been made for home-office deduction. Straight up home sales are given exemption up to $250,000 in capital gains for single individuals and twice that amount for couples. For those who work from home and claimed deduction from it, they have to pay a separate capital gains tax on the amount deducted. Janet C. Hagy, president of Hagy & Associates, an accounting firm based in Texas said this is called "recaptured depreciation" and is taxable at a rate of 25 percent and the only way to reduce this is if the seller has registered an income-tax bracket of less than 25 percent.
The specific location in the house of the home office also plays a crucial role. If it is separate or free standing like a guest house, owners need to file separate taxes for the home and the office.
In a report by US News, the IRS has outlined the requirements for having a legitimate home office which people can file for a deduction. It should be the primary workplace which means owners cannot claim if they have a job and report to a separate office in a 9 to 5 schedule. It should also be exclusive for work and do not double as a living space.
