7106 S Knolls WayCentennial, CO 80122Knolls West Townhomes SouthGlennFantastic townhome! Clean and inviting in highly desirable location, popular Knolls West Townhome Community! Walking &
3 Valuable Tax Deductions That Real Estate Pros Often Overlook
3 valuable tax deductions that real estate pros often overlook
Windfall image via Shutterstock.
Home office deduction
Almost any real estate professional who uses a portion of his or her home exclusively for business can qualify for this deduction. This is so even if you do the bulk of your work outside your home.This deduction is particularly valuable if you are a renter because it enables you to deduct a portion of your monthly rent, a sizable expense that is ordinarily not deductible. If you own your home, it is not worth as much, but still permits you to deduct a portion of your utilities and other home expenses and depreciation for the area of your home office.Even though they qualify for the home office deduction, many people don’t take it because it can be complicated and/or they fear it will increase their chances of getting audited. There is no empirical evidence that taking this deduction increases your chances of being audited. For years, the IRS has denied that the deduction is an audit flag.In fact, the IRS has created an optional simplified version of the deduction in attempt to encourage people to take it. Using the simplified method, you merely deduct $5 per square foot of your home office space, up to a maximum of 300 square feet. The simplified home office deduction can be used only for 2013 and future tax years. So this is the first tax filing season it is available. We discussed the simplified method in detail in a prior article (see “Simplified home office deduction may not be the best option”).
State sales taxes
If you itemize your deductions, you have a choice between deducting the state and local income tax or state sales tax you paid in 2013. If you live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington or Wyoming, you don’t pay any state income taxes and can only take the sales tax deduction. If you live in one of the other 42 states that has income taxes, you’ll usually be better off deducting such taxes, rather than sales tax. However, this may not be the case if you bought an expensive item during 2013, such as a car or boat, that required you to pay substantial sales tax.Since figuring out how much you actually paid in sales tax during 2013 (or any other year) is likely impossible, the IRS has estimated how much sales tax people at various income levels pay on average in each state based on that state’s sales tax rates. Its results are contained in the sales tax tables in the instructions to IRS Schedule A. But you are allowed to add to the total in the table the actual sales tax you pay for:
- a motor vehicle (including a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle).
- a leased motor vehicle.
- an aircraft or boat.
- a home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home).
If you moved during 2013, the cost is deductible if your new workplace is at least 50 miles farther from your old home than your old job location was from your old home. In addition, you must work full time at your new job for at least 39 weeks during the first 12 months after the move, and for a total of at least 78 weeks during the first 24 months following the move. If you meet these requirements, you can deduct the reasonable expenses of:
- moving your household goods and personal effects (including in-transit or foreign-move storage expenses).
- traveling (including lodging but not meals) to your new home.
As a Full Time real estate agent for the past 23 years, Sheryll has helped hundreds of home owners in Colorado buy and sell their homes. Sheryll's easy going, no pressure style and her in depth knowl....