by: Rebecca Alwine, PCSGrades Blogger Affiliate
Its tax season and with the headache of gathering paperwork, comes a sense of satisfaction each time you can find a new deduction. Plus, it’s a good distraction for those of us doing the PCS limbo or those of us who just moved somewhere new and are trying to meet people. 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.
Author: Rebecca Alwine is a PCSgrades’s Blogger Affiliate and a freelance writer, army wife, and mother of three. Over the past 10 years, she’s discovered she enjoys coffee, running, lifting weights, and most of the menial tasks of motherhood. When she’s not writing, she can usually be found hiding behind the sewing machine or with her nose in a book. Her writing experience includes military family topics, research pieces, guest blogging, and much more. She’s a contributing writer for ARMY Magazine, a regular contributor for several publications including to Homefront United Network, PCSGrades, ESME, and has also been published in Ms. Magazine and The Atlantic. You can follow her online at www.whatrebeccathinks.com or on Twitter (@rebecca_alwine) and Instagram (@rebecca_alwine).