April 15 may seem pretty far away, but it always arrives faster than we anticipate. That’s why you should begin to prepare for your 2020 taxes now. Because the tax laws have undergone a major overhaul, your first preparatory step should be gaining an understanding of the new tax law changes. And then you should take some practical steps like assembling pertinent documents. Below is what you should be doing now to prepare for your 2020 taxes as a Broadview Heights homeowner.
Understand the Changes
The best first step you can take to prepare for your 2020 taxes is to understand the important changes in tax laws for Broadview Heights homeowners. These include:
STANDARD DEDUCTION INCREASED
The standard deduction – which is the amount of deduction that everyone gets regardless of whether they have other actual deductions – is now nearly double what it was. And this means that fewer people will need to itemize because they can get a better deal with the standard deduction. This also means that 56% fewer homeowners will need to itemize to get a tax break for mortgage interest paid. They will instead be better off just taking the standard deduction.
Repealed Personal Exemption
In order to properly prepare for your 2020 taxes, you also need to be aware that the personal exemption has been repealed. You can no longer take a $4,150 deduction for each member of your household. This means, according to tax experts, that your “household composition will probably affect your tax status.”
Here’s an example. A “family of four with two kids over 16 in the 22% tax bracket” will “no longer have personal exemptions totaling $16,600. Although the increase in the standard deduction is worth $2,420 . . . the loss of the exemptions would cost them an extra $3,652 . . . So they lose $1,232.”
If yours is a similar case as a Broadview Heights homeowner, then you may be better off itemizing.
MORTGAGE INTEREST DEDUCTION CHANGE
The mortgage interest deduction, which has always been important for homeowners, now has a lower cap of $750,000 for the loan amount. While this won’t affect most people, it will impact those living in areas where housing is outrageously expensive.
The takeaway here is that if you do live in such an area or have a luxury home, you need to consider this change when you prepare for your 2020 taxes.
LOCAL AND STATE DEDUCTION CAPS
Another important deduction cap to consider when you prepare for your 2020 taxes as a Broadview Heights homeowner is the one for local and state taxes. These taxes would include state income tax, sales tax, and property taxes, they are still deductible, but the cap is now $10,000 for all taxes combined. And this will be bad news for homeowners who live in high tax areas.
HOME EQUITY LOAN USE
Many people who have built up some equity in their home often take out a home equity loan to cover large expenses like medical bills or for major purchases. Now, however, you can deduct home equity loan interest, tax experts warn, “only if you used the proceeds to substantially better your home and only if the total, combined with your first mortgage, doesn’t go over the $750,000 cap.”
If you have a plan to or have taken out a home equity loan, this is definitely something to keep in mind when you prepare for your 2020 taxes as Broadview Heights homeowner.
The Practical Steps
Now, after gaining some understanding of pertinent changes in tax laws, the next thing to do to prepare for your 2020 taxes is to take some practical steps, such as:
COLLECT AND ORGANIZE RECORDS AND DOCUMENTS
Here’s what a premier tax site has to say. “Good organization may not cut your taxes. But there are other rewards, and some of them are financial. For many, the biggest hassle at tax time is getting all the documentation together. This includes last year’s tax return, this year’s W-2s and 1099s, receipts and so on.”
GATHER THE PROPER TAX FORMS
Another thing you can do now to prepare for your 2020 taxes as a Broadview Heights homeowner is to gather all the tax forms you need. If you itemize, you probably can’t get all the forms you need at the post office or library anymore. A better option is to go straight to the IRS’s website and download all the forms you’ll need.
BEGIN ITEMIZING NOW
First, you need to determine whether you’ll be better off taking the standard deduction or itemizing. Then, if you find you need to itemize, begin now. Begin working now to figure out all the deductions you can take to expedite everything when April rolls around. Your agent may be able to help you find real estate related deductions you aren’t even aware of. Discover more by calling or texting (440) 628-1321.
DO THE LEGWORK FOR THE HOME OFFICE DEDUCTION
If you do most of your work from home and have a dedicated area for that work, you may be able to take the home office deduction. And now is the time to do the preliminary work for that in order to prepare for your 2020 taxes as a Broadview Heights homeowner.
You can deduct some of your utility bills and other related expenses for your home office proportional to the area of your home the office occupies. This means you will need to calculate your home’s total square footage, as well as your home office’s square footage. And now is the time to get out your tape measure to make that calculation.
The Final Step
And don’t forget to consult both your tax person and a local real estate agent. They can both help you to prepare for your 2020 taxes as a Broadview Heights homeowner. Each possesses knowledge that complements what the other has.