Zoom Tax

TAX TIPS TO GET A BETTER RETURN...

9. Property Taxes Are Deductible
In a move that frankly makes no sense, the IRS lets you deduct taxes on your tax return! Seriously.

On your federal tax return, you can claim any state and local property taxes you pay. While you might not realize you’re forking them over, you’re actually paying state and local property taxes with every mortgage payment. They go into escrow, where the mortgage lender pays them once a year. On your yearly summary, you can look up the cost of property taxes for your listing. Even if you just bought the house, it should list what taxes you paid versus what the old owners paid for the year — but be sure that you deduct only your amount, of course.

Remember, however, that this only applies to those itemizing their deductions. Take the standard deduction, and you’re outta luck.

REDUCE YOUR TAXES WITH THESE TIPS...

3. Buy a Second Home
It may seem positively crazy to save taxes by buying a whole new home. And don’t be mistaken; for most, it’s not a reasonable way to “save” money. But here’s the thing: All the tax breaks that we’ve talked about that apply to your first home? They apply to a second one too. That means you get to write off mortgage interest (up to $1.1 million), property taxes and all the rest. The only catch is that you can only do that if you’re not renting out the home.

If you’re renting it out only a few days a year? You’re in real luck. You can pocket any rental income — tax-free — if it’s rented out less than 14 days a year, along with the other deductions. If you rent it out for more than 14 days, you’re going to have to report all your rental income. But if you’re still using it at the time for personal use, you can use write-off deductions based on the percentage you spend personally using it. So, if you rent out the house a couple months a year, use it a month a year and keep it empty for the remainder, you can’t include the cost of the rental time in your allocations. Everything else? Fair game.