Summer is a time of change and transition for many American families that take advantage of this time to make some significant life changes – whether it be moving to a new city or buying a home. This is especially true for families with school age children as they can take advantage of this time to schedule their home buying, relocating, and even home remodeling to the summer months while school is out. These summer events could have significant tax implications for those that itemize their deductions. Due to the new tax laws that have resulted in less taxpayers itemizing their deductions, the new laws have implications you should be aware of, according to Optima Tax Relief, an authority in the tax resolution industry.
Using the summer months to purchase or refinance a new home
If you plan on moving this summer and will be buying either a first or second home, the mortgage interest allowable deduction has been decreased from the previous total of $1 Million to $750,00 ($475,000 if you are married but filing separately) in qualifying debt.
Planning on refinancing? The allowable deduction for mortgage interest is limited to the interest paid on the taxpayer’s main home or second home’s mortgage. These loans must be used to buy, build, or substantially improve your home. Keep in mind the mortgage interest deduction is subject to the same new lowered limits as those buying a home.
Using that free time to give back
Whether you plan on doing a thorough clean out of all those winter clothes, or you are taking advantage of your vacation days to clean out your garage, you may find yourself with many items you wish to donate to charity. These donations can still qualify for a tax deduction – if you itemize these deductions, and keep documentation and proof of these charitable donations. You can even deduct 14 cents for every mile you spend driving to drop off those donations, or even driving to participate in other charity work. Keep the IRS’s Interactive Tax Assistant bookmarked to help you navigate your potential deductions.
Still not sure if your actions will result in tax implications? Optima Tax Relief recommends checking with a tax professional ahead of time to make sure you are setting yourself up for a successful tax season.