This is an article submitted by a guest author. Not all views expressed are those of AmeriFirst Home Mortgage or its employees.
As Tax Day approaches this year, you may still be feverishly working on your taxes or perhaps you are avoiding them altogether until the last minute because you are fearful of what you will discover. With an average refund from the IRS of $2,800, chances are good that you will qualify for a refund this year if you prepare your taxes correctly. Here are five secrets that you should know if you invest in real estate as you prepare your 2016 year-end taxes.
Selling Your Main Home
The IRS allows you to exclude any gain that you have received if you have sold your home this year. Of course, a real estate agent from a company like Century 21 Town & Country is the best person to help you get a high price for your home. This exclusion does not apply to rental homes or homes that you use for business but only to your primary residence. In addition, you can only exclude up to $250,000 if you file singly or $500,000 if you file a joint return. If you can exclude the entire portion, you will not need to report the sale of your home on your taxes.
Selling Your Rental Home
If, however, you have sold a rental home in 2016, you can only exclude the gain from the sale of the home if you meet several qualifications. First, you must solely own the home. Second, you must have lived in the house for more than two years while you owned it. Keep in mind that the depreciation due to renting out the home cannot be excluded from the gain.
If you have renovated a home in order to meet medical needs, you may be able to claim the renovations as a deduction on your taxes. This could include the cost of adding grab bars or wheelchair ramps. However, the changes must have been made for medical necessity and not simply for improving the value of the home.
Mortgage Insurance Premiums and Mortgage Interest
Mortgages obtained from 2007 and on qualify for premium payment deductions on your taxes. In addition, you can deduct the interest that you paid on mortgages of up to $1 million if you are filing jointly and $500,000 if you are filing singly. This rule changes for 2017 taxes, but you can still claim it for the year ending 2016.
This is the last year that you will be able to receive tax relief if you were foreclosed on in 2016. In 2014, the average amount that homeowners were able to exclude from their incomes due to foreclosure was $94,210, which is a sizable amount. For the upcoming year, a CPA may be able to help you find ways to deduct this money from your taxes in a different way because the mortgage debt forgiveness exclusion expires.
If you have numerous real estate investments, you will most likely find that it will be worth the cost to find a CPA who specializes in preparing taxes for someone like you. He or she will most likely be able to find you all the refunds for which you qualify. However, whether you prepare your taxes yourself or hire a CPA this year, be sure to take advantage of these secrets for getting the best refund possible.
*AmeriFirst Home Mortgage is not an agency that handles taxes. Be sure to talk to your accountant or tax advisor for actual tax advice
Author Bio: Dixie Somers is a freelance writer and blogger for business, home, and family niches. Dixie lives in Phoenix, Arizona, and is the proud mother of three beautiful girls and wife to a wonderful husband.