Are You Moving? Here’s How it Will Affect Your Taxes
It’s a new year which means a new tax season is upon us. No matter how you file your taxes you’ll be asked the question: did you move last year?
This easy “yes” or “no” question can lead to many more questions and those will determine how much money you get back from the IRS. If you have moved in the past year, here are a few scenarios you should be ready for when it’s time for taxes.
You Moved Across State Lines
Whether you bought or sold a home, even rented or slept in a friend’s basement, you’ll need to file a part-year tax return. You should get W-2 forms that show the income you earned in each state you lived in in the past year if you changed employers or not.
Moved for your job? You might be able to deduct travel and moving expenses so be sure to keep track of all of the information.
Moves paid for you by your employer are not tax deductible but keep all of the receipts in case you find out you are somehow not eligible for reimbursement. Then you can claim them on your taxes.
You Bought A Home
When you buy a house you get a whole new batch of expenses but you also get tax benefits from owning a home. Tax codes are changing for 2018. If you purchased a home in 2017, the pro-rated mortgage interest for up to $1.2 million of debt is deductible – and that remains the case for future filings.
But if you purchase a home in 2018 or after, your future deduction is limited to interest on mortgage debt up to $750,000, following the passing of the Tax Cuts and Jobs Act in December 2017.
Points can also be tax deductible. That is the pro-rated real estate taxes from the point of purchase and loan origination fees. But starting with your filing for the 2018 calendar year, the property tax deduction is limited to $10,000.
Make sure you get your 1098 from the mortgage company if you purchased a home with a mortgage last year. This form reports the deductible mortgage interest, points and taxes. If you used cash for your home purchases you won’t receive this form. But your real estate taxes are still deductible.
You’ll also want to keep the closing statement for taxes. It is drawn up by the attorney or the title company. The closing disclosure should also be brought when you do your taxes.
If you refinanced your mortgage you can also deduct points paid at the time of your refi. It’s typically smaller portions over the duration of the loan rather than all at once.
You Sold Your House
Selling a home doesn’t come with all the mortgage-related deductions for your return, but in most cases you can keep the profit from the sale tax-free. A profit of up to $250,000 for individuals and $500,000 for couples filing jointly does not have to be reported to the IRS as long as you primarily lived in the residence for at least two of the last five years.
Also, keep the closing settlement for your records as well as any evidence of major home improvements you’ve done on the house. You may be able to subtract that, too.