Good news for military families who are stuck at home during the Coronavirus pandemic: 2019 taxes are now deferred until July 15 instead of April 15. (This is true for all citizens, not just military families.) You can still file your taxes now if you wish, since it may take a while to receive a refund. But if you will owe taxes this year, you won’t need to file that payment until the summer. The IRS announced that there will be no penalties for “late filing” until after July 15, 2020.
For military families struggling with stop orders on PCS moves and uncertain dates, the tax extension can be a welcome relief. For those wondering whether or not to continue moving forward on a home purchase, we pulled in an expert to help you make important decisions before you PCS. So, buckle up, let’s talk about taxes and home ownership and taxes.
First, the Expert
Erin Ward, Realtor, and owner of HRVA Homes, which is part of Keller Williams Elite-Town Center in Virginia Beach, gave us the inside scoop on this hot topic. Ward, a Navy spouse, recommends talking to a professional tax advisor to ensure that all deductions are applicable and available
Q: Does buying a house help with taxes?
Erin: Yes! This is often the biggest motivator for buyers. Interest and property taxes can both be deducted. Depending on your Adjusted Growth Income, your private mortgage insurance (PMI) may also be deductible.
Q: If I rent out my house, does that help me?
Erin: Andrew Carnegie said, “90% of millionaires become so through real estate,” and I agree! With military buyers, we always keep renting out a home in mind when shopping for their house. It may be the best option when orders come; future planning should always be considered when house shopping. When receiving rental income, the IRS guidelines say you can deduct certain items. Some of those include PMI, property taxes, maintenance, and depreciation. Double and triple check with the IRS rules on the rental timelines.
Q: Do I need to hire a tax professional if I own a house?
Erin: I always suggest consulting a tax professional when it comes to IRS rules. Each year there are additions and changes to deductions available, especially with the home buying grants and programs. Consulting a professional would never be a bad idea; it can help protect your investments and assets. (This doesn’t mean you have to pay for it! There are several tax professionals and companies that work with military families for free or reduced costs.)
Q: Is there a downside to home ownership in regards to taxes?
Erin: The biggest change is probably in the complexity of taxes. Most people will transition from the 1040EZ form to itemized tax forms that can get slightly more complicated. However, usually, this is a small hurdle that is worth it based on the increase in deductions. Property taxes play a role in expenses when you are budgeting for a new home, but they are deductible on federal taxes, so that is a help as well.