316 Casey Key Road – MLS# A4457320
*Updated for the 2020 tax season
Get your tax documents ready. A more complicated filing season is underway. If you have questions about how challenges in 2020 may have affected the way you file, the IRS has you covered with additional information on Recovery Rebate Credits, Refund Interest Payments, and more.
Owning a home can be a considerable expense. Make sure you don’t miss out on these potential deductions for homeowners.
First thing’s first. Have you declared primary residency in Florida?
If yes, feel free to skip ahead to the tax deductions you’ll enjoy from doing so. If not, but would like to take advantage of the Sunshine State’s deductions for the following tax year, here’s what you’ll need.
- File a formal Declaration of Domicile – Found online or at your local county clerk’s office, this document declares that you intend to make Florida your primary and permanent home. This document must be signed in front of a notary public or the deputy clerk of a Florida court. There is a small fee. Although this is not REQUIRED to establish residency it does provide a public record of your intentions, which could be helpful if you own properties elsewhere.
- Obtain a Florida driver’s license or non-driver ID card – You have 30 days to do so following your Declaration of Domicile. Your former license will be confiscated.
- Register and insure your vehicles – Depending on the circumstance, failure to insure your vehicles in your resident state can result in denied claims or fraud penalties.
- Register to vote – After getting your new ID, register to vote. Even better – vote in an upcoming election to solidify your commitment to your new community.
- Open local bank accounts – Transfer at least one out-of-state account to a local Florida institution.
- Notify tax officials – You can download and fill out Form 8822 to formally indicate your change of address or simply use your new address on your next tax return.
- File your homestead exemption – If you qualify, $50,000 of your assessed property is exempted from taxation
- Update your estate plan – Florida differs from other states when it comes to power of attorney laws and who can/can’t inherit your primary residence. It is advised that you seek the guidance of a Florida attorney, accountant or financial adviser.
- Remember to cut ties with your old state – Be careful you aren’t double-dipping when it comes to tax exemptions in multiple states. Communicate clearly to your former state government of your transition to Florida to avoid costly penalties.
5 tax deductions
Mortgage interest
A change to the tax laws went into effect for mortgages acquired after 2017, stating that taxpayers will only be able to deduct interest on mortgage debt that totals $750,000 (or $375,000 for married couples filing separate returns). Those holding existing debt from prior to December 31, 2017, are still able to deduct interest for loans up to $1 million dollars.
Vacation Homes: If you purchased a second home prior to 2018, you can deduct mortgage interest as long as your combined mortgages are under $1 million. It is important to note any vacation homes purchased after 2017 are no longer permitted to deduct mortgage interest under this rule. Learn more about deducting interest on second residences at IRS.gov.
Mortgage points and insurance
If you purchased a home in the last calendar year, loan points for your primary residence may be deductible. Generally, these deductions are for a portion of the points spread throughout the life of the loan, but in rare cases, the full amount may be deducted in the year paid if you meet certain requirements. This extends to home improvement loans and refinanced loans as well. Learn additional details about points at IRS.gov.
Property taxes
Yes, you can deduct your property taxes off your tax return! Keep your property tax bills and proof of payment. State and local tax deductions are capped at a combined total deduction of $10,000 ($5,000 if married filing separately). Learn more about deductible taxes at IRS.gov.
Medical home improvements
Any changes that have been made to your home related to medical reasons for you, your spouse, or your dependents are deductible. Whether you are constructing entrance ramps, adding handrails, or even an elevator, improvements may be included if you itemize your deductions. However, be aware that any changes that add value to your home – such as installing an elevator – may be deducted only to the extent they exceed the increase in the home value caused by the improvement.
Beyond improvements, you can also deduct any fees related to operation and upkeep of that improvement. For example, the cost of electricity to operate the elevator, or the service of a maintenance man. Read more related to medical and dental expenses at IRS.gov.
Energy efficient upgrades
Renewable Energy Tax Credits allow you to deduct 30% of the costs of major energy installations including solar water heaters, solar panels, geothermal heat pumps, small wind turbines, and fuel cells. The installations only qualify if they have been done to a home you own and use as a residence. There is also a gradual step down to the credit value between now and 2022.
- 30% for systems placed in service by 12/31/2019
- 26% for systems placed in service after 12/31/2019 and before 01/01/2021
- 22% for systems placed in service after 12/31/2020 and before 01/01/2022
Expires: December 31, 2021
Learn more at IRS.gov. To apply, you must file IRS form 5659 with instructions here.
EnergyStar products and qualified energy-efficient products are also eligible for tax credits – 10% of the cost up to $500. These may include insulation, exterior windows and skylights, water heaters, and central air conditioners. You can find out what qualifies on the EnergyStar website.
We encourage you to speak with your personal accountant to determine the tax deductions for which you are eligible. To learn more about Manatee, Charlotte, and Sarasota real estate visit MichaelSaunders.com.