How Moving to a New Home Affects Your Taxes
We are currently in the beginning of a new tax season, and the beginning of needing to file last year’s tax returns. Whether filing your return on your own or using professional help you will always come across the important question: “Did you move last year?”
Though it is a simple yes or no question to arrive at an answer, it can lead to a much longer list of questions when filing your return. It can even make a significant difference in the overall outcome of your tax return.
Here are 3 Things Concerning New Homes When It Comes to Taxes You Should be Aware Of
Moving to a New State
Many, many people relocated from one state to another for several different reasons during 2020. It does not matter if you purchased a home or sold a home, rented, or just hung out with friends. If you moved to a different state last year you will be required to file a part-year return. Your W-2 should help to provide information about your income in each state you lived in over the last year.
If filing on your own, there are some online services like TurboTax and H&R Block that have systems to help with this. The online question and answer process will walk you through the necessary steps.
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If you moved for work you will be able to deduct moving expenses including storage fees, moving company costs, and travel expenses. Make sure you have a way to keep track of those expenses. If the move was paid for by your employer you cannot deduct those expenses.
Purchasing A New Home
Buying a new home opens a large can of new expenses, including property taxes. It can also bring some tax benefits. You can write off mortgage interest for example. Just make sure you know how much you are eligible for, this will depend upon the price of your home.
Taxes from the point of purchase and loan origination fees (points) are also tax-deductible, but they are limited.
You will need to have the 1098 form from your mortgage company handy, this form reports deductible mortgage interest, points, and real estate taxes paid out of escrow.
Homes paid for in cash will not be able to deduct mortgage interest or loan fees but can deduct real estate taxes. A tax receipt from the tax assessment will need to be used as proof taxes were paid.
Read More: Ohio's Mortgage Tax Credit
Important Papers for Buyers to Have Handy
- Closing statement
- Closing disclosure
These forms will help to easily find the exact numbers and information needed for reporting eligible deductions.
If You Sold a Home
Selling your home does not come with mortgage-related deductions like buying one does. In many cases, a home seller can keep the profit from the sale tax-free. Profits up to $250,000 per individual homeowner and $500,000 for jointly filing couples can be retained tax-free. This only applies if it is your primary home.
Sellers Should Obtain:
- Closing Settlement
- Evidence of Major home Improvements
If you have not lived in the home the required amount of time any paperwork that proves circumstances like job relocation or illness that required you to reside somewhere else can alleviate your taxes on the profit
Additional: The Cost of Remodeling a Kitchen
For more information on buying or selling a home in Columbus and surrounding areas please contact us at any time.
Additional: A Stress-Free Checklist for Moving