Solved: This is our first home, we bought it last year. First off, I feel like we aren't getting the tax break we should. Second, what does property owners residential exemption mean?
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This is our first home, we bought it last year. First off, I feel like we aren't getting the tax break we should. Second, what does property owners residential exemption mean?

 
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This is our first home, we bought it last year. First off, I feel like we aren't getting the tax break we should. Second, what does property owners residential exemption mean?

There are two potential shortcomings with your situation. Let's handle them one at a time.

First, buying a house and property tax does qualify. However, there can be any number of reasons it doesn't show up on your Schedule A (Itemized Deductions).

One common reason is that your total itemized deductions (Property Tax, Mortgage Interest, Charitable Donations and State Income Tax) don't add up to more than the standard deduction for your filing status. More info about your situation would be needed to know for sure.

Especially for first-time homebuyers, timing is everything. If you buy a house towards the end of the year, the home owner deductions (Mortgage Interest and Property Tax) won't add up to anything significant or helpful in the few months that you owned it. In fact, if you bought in November, your first mortgage payment is sometimes not until January. That's no help for this tax filing.

However, if you bought in January or February, you have 11 or 12 months for that interest to accumulate and help you in your taxes.

Unfortunately, according to the IRS, you can't take any repairs or improvements to a house you personally use.

Here is some info on closing costs from your HUD statement that may help:

You can deduct any taxes paid or mortgage interest as part of your closing costs and reported on your HUD-1.

The following lines may vary as the official HUD form changes over time: http://www.hud.gov/offices/adm/hudclips/forms/files/1.pdf

·         210 - City/town taxes - Deductible as itemized deduction on Form 1040 schedule A

·         211 - County taxes - Deductible as itemized deduction on Form 1040 schedule A

·         801 - Loan Origination Fee - Deductible as itemized deduction ('points') on Form 1040 schedule A

·         802 - Loan Discount - Deductible as itemized deduction ('points') on Form 1040 schedule A

·         901 - Daily interest charges - Deductible as itemized deduction - this interest typically included in year end interest statement (Form 1098)

·         1004 - Property taxes - Deductible as itemized deduction when paid from escrow; can be added to property taxes on your 1098 to indicate total amount of property tax paid for the year.

Here are the standard deduction amounts for 2016. (Your itemized deductions need to exceed this number in order for them to help you and trigger a Schedule A on your return.)

Filing Status Standard Deduction

Single $6,300   

Married Filing Jointly $12,600

Married Filing Separately $6,300

Head of Household $9,300

Qualifying Widow(er) $12,600

Next, maybe using some of the shortage on your mileage reimbursement may help.

Remember that there are plenty of other possible employee expenses that you're entitled to deducted:

  • Home office costs. The office must be your principal place of business and be for the convenience of your employer—not just helpful in conducting your job.
  • Job search expenses in your current occupation, even if you don’t land a new job. This includes everything from the cost of producing and copying your resume to travel expenses you incur while interviewing or searching for a job.
  • Legal fees related to doing or keeping your job.
  • The cost of a passport for a business trip.
  • Union dues and expenses. However, you cannot deduct the portion of the fees that pays for sick, accident or death benefits or for a pension fund, even if the fees are required dues.
  • Work clothes and uniforms that are not suitable for everyday use and are a condition of your employment.
  • Tools (including the business use of your cell phone and internet)
  • Dues or subscriptions to professional societies
  • Licenses
  • Travel and meals for business, including DOT per diem
  • Excess educator expenses
  • Education that either maintains or improves job skills or is required to keep your salary or job.

This is how to enter your partially reimbursed mileage. A short explanation follows.

Enter all your business miles and expenses here:

·         Go to Federal Taxes,

·         Click Deductions and Credits, 

·         Select I'll choose what I work on 

·         Select Job-Related Expenses under Employment Expenses. 

Enter ALL business miles driven and vehicle information first in the interview questions. Then, it will ask for reimbursement information.

You can potentially write off the mileage driven for work minus the mileage you were reimbursed for. As an employee, you can deduct unreimbursed vehicle expenses as job expenses, but you must be able to itemize your deductions

For instance, the IRS standard mileage rate is $.54/mile. If you drove 10,000 miles ($5,400 at the standard 2016 IRS rate) but the company only reimbursed you $4000, you could deduct the additional $1,400 as an unreimbursed business expense. Of course, you would enter your additional business expenses (cell phone, office supplies, Meals & Entertainment).

If you own a fairly expensive vehicle or lease it and you drive a high percentage for business use, you may consider take the actual expenses instead of the standard mileage rate. The reimbursement would be the same.

Here's a good explanation on how the actual expense method works:

https://ttlc.intuit.com/replies/5681258









View solution in original post

4 Replies
Highlighted
New Member

This is our first home, we bought it last year. First off, I feel like we aren't getting the tax break we should. Second, what does property owners residential exemption mean?

There are two potential shortcomings with your situation. Let's handle them one at a time.

First, buying a house and property tax does qualify. However, there can be any number of reasons it doesn't show up on your Schedule A (Itemized Deductions).

One common reason is that your total itemized deductions (Property Tax, Mortgage Interest, Charitable Donations and State Income Tax) don't add up to more than the standard deduction for your filing status. More info about your situation would be needed to know for sure.

Especially for first-time homebuyers, timing is everything. If you buy a house towards the end of the year, the home owner deductions (Mortgage Interest and Property Tax) won't add up to anything significant or helpful in the few months that you owned it. In fact, if you bought in November, your first mortgage payment is sometimes not until January. That's no help for this tax filing.

However, if you bought in January or February, you have 11 or 12 months for that interest to accumulate and help you in your taxes.

Unfortunately, according to the IRS, you can't take any repairs or improvements to a house you personally use.

Here is some info on closing costs from your HUD statement that may help:

You can deduct any taxes paid or mortgage interest as part of your closing costs and reported on your HUD-1.

The following lines may vary as the official HUD form changes over time: http://www.hud.gov/offices/adm/hudclips/forms/files/1.pdf

·         210 - City/town taxes - Deductible as itemized deduction on Form 1040 schedule A

·         211 - County taxes - Deductible as itemized deduction on Form 1040 schedule A

·         801 - Loan Origination Fee - Deductible as itemized deduction ('points') on Form 1040 schedule A

·         802 - Loan Discount - Deductible as itemized deduction ('points') on Form 1040 schedule A

·         901 - Daily interest charges - Deductible as itemized deduction - this interest typically included in year end interest statement (Form 1098)

·         1004 - Property taxes - Deductible as itemized deduction when paid from escrow; can be added to property taxes on your 1098 to indicate total amount of property tax paid for the year.

Here are the standard deduction amounts for 2016. (Your itemized deductions need to exceed this number in order for them to help you and trigger a Schedule A on your return.)

Filing Status Standard Deduction

Single $6,300   

Married Filing Jointly $12,600

Married Filing Separately $6,300

Head of Household $9,300

Qualifying Widow(er) $12,600

Next, maybe using some of the shortage on your mileage reimbursement may help.

Remember that there are plenty of other possible employee expenses that you're entitled to deducted:

  • Home office costs. The office must be your principal place of business and be for the convenience of your employer—not just helpful in conducting your job.
  • Job search expenses in your current occupation, even if you don’t land a new job. This includes everything from the cost of producing and copying your resume to travel expenses you incur while interviewing or searching for a job.
  • Legal fees related to doing or keeping your job.
  • The cost of a passport for a business trip.
  • Union dues and expenses. However, you cannot deduct the portion of the fees that pays for sick, accident or death benefits or for a pension fund, even if the fees are required dues.
  • Work clothes and uniforms that are not suitable for everyday use and are a condition of your employment.
  • Tools (including the business use of your cell phone and internet)
  • Dues or subscriptions to professional societies
  • Licenses
  • Travel and meals for business, including DOT per diem
  • Excess educator expenses
  • Education that either maintains or improves job skills or is required to keep your salary or job.

This is how to enter your partially reimbursed mileage. A short explanation follows.

Enter all your business miles and expenses here:

·         Go to Federal Taxes,

·         Click Deductions and Credits, 

·         Select I'll choose what I work on 

·         Select Job-Related Expenses under Employment Expenses. 

Enter ALL business miles driven and vehicle information first in the interview questions. Then, it will ask for reimbursement information.

You can potentially write off the mileage driven for work minus the mileage you were reimbursed for. As an employee, you can deduct unreimbursed vehicle expenses as job expenses, but you must be able to itemize your deductions

For instance, the IRS standard mileage rate is $.54/mile. If you drove 10,000 miles ($5,400 at the standard 2016 IRS rate) but the company only reimbursed you $4000, you could deduct the additional $1,400 as an unreimbursed business expense. Of course, you would enter your additional business expenses (cell phone, office supplies, Meals & Entertainment).

If you own a fairly expensive vehicle or lease it and you drive a high percentage for business use, you may consider take the actual expenses instead of the standard mileage rate. The reimbursement would be the same.

Here's a good explanation on how the actual expense method works:

https://ttlc.intuit.com/replies/5681258









View solution in original post

Highlighted
Level 3

This is our first home, we bought it last year. First off, I feel like we aren't getting the tax break we should. Second, what does property owners residential exemption mean?

how/where can closing costs that are deductible as itemized, (items explained in reply above), be entered from closing disclosure or hud correctly if not listed on 1098? i read other Q&As that seem to contradict each other..? thank you in advance!

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Expert Alumni

This is our first home, we bought it last year. First off, I feel like we aren't getting the tax break we should. Second, what does property owners residential exemption mean?

For purposes of your personal itemized deductions the closing costs that are deductible from the closing statement are property taxes and pre-paid interest only.  

@daa

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Level 3

This is our first home, we bought it last year. First off, I feel like we aren't getting the tax break we should. Second, what does property owners residential exemption mean?

thank you! when entering as separate 1098, should i check the box that says interest amount is different than whats on my 1098?

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