Top Tax Deductions Overlooked for Homeowners/Investors – - There are numerous deductions that can easily be overlooked – - Consult a Tax Professional who specializes in Real Estate to maximize your savings.

The Big Dady for the Year – $7500 First Time Homebuyer Tax Credit!

1.    Depreciation.  The actual cost of the house or apartment building, minus land value, needs to be deducted each year.  This is deducted by depreciation with a life of 27.5 years if residential and 31.5 years if commercial.
2.    Legal and Professional Services.  All fees paid to a professional related to your rental activity are deductible as an operating expense directly from the rental income received.  This includes tax preparation paid for your rental activities.
3.    Insurance.  You can deduct the premiums paid for your rental activity.  Remember in the year of purchase to deduct the pre-paid insurance that is reflected on the HUD.
4.    Local Travel.  Going to check on your property or pick up supplies?  All travel relating to your rental activity is deductible and the standard mileage rate at 48.5center per mile (50.5 cents per mile for 2008 rates).

5.    Qualified Mortgage Interest:
Mortgage interest on loans used to acquire up to 2 homes.
Total acquisition loans cannot exceed $1million
Interest paid on refinance loans are also deductible
Mortgage interest on home equity loans
Total home equity loans cannot exceed $100,000 or fair market value of home used as security
Points paid on a loan to acquire or improve primary home
Points paid on refinancing must be amortized over the life of the loan

Acquisition Closing Costs.  Loan costs of obtaining a loan in order to acquire real estate are not included in the basis of the property but are separately capitalized and are amortized over the life of the loan.   Basis Costs separate from loan-related costs are costs to defined or acquire title and are added to the property’s basis.

Notable Self Employment Tax Tips:
*Use your capital losses against capital gains.
*Consider selling some of those loss stocks.
*Defer income where possible.
*Set up profit and sharing programs.
*Look at your itemized deductions.
*Consider prepaying your expenses by credit card.
*Charge expenses this year even if you do not make payments until next year.  Pay abit more in state taxes this year so you can get the deduction. If you refinanced your home or a loan, any nondeductible points are immediately deductible.
*Hire your child and put some of this money into a Roth IRA for them.
*You can write off up to $25,000 on a new vehicle.
*You can write off the business portion use.
*Write off up to $125,000 on other business expenses. • Make the purchase this year, take the deduction and pay for it next year.
*Postpone income and accelerate deductions.
*Donate inventory and take a deduction on what it is worth.
*Do seller financing on your business if you are going  to sell your business. This is a way to defer the tax.
*Set up an S Corp. and if you pay yourself a reasonable salary, anything beyond that is a dividend that is exempt from social security and federal unemployment tax.
*Take a 100-percent deduction for an employee party.
*Deduct 100 percent of your health insurance premiums and consider hiring your spouse and setting up a self-ensured medical reimbursement plan. This will allow you to deduct other medical expenses.
*Get a dollar-for-dollar tax credit reduction in your taxes for implementing energy measures such as solar panels or energy-saving windows.
*Deduct your business losses. You can also forward your business losses for the • next 20 years. (Regarding this last item, for example, if your spouse earns a $50,000 salary and your business had a loss of $10,000, you can net out the two so you pay taxes on $40,000. Or, you get married and your loss exceeded the whole family’s income for the year. You can carry that loss back as if you got that loss in prior years and get a refund from the federal government, and sometimes the state, for the last two years of taxes that you paid.  Or, you can elect to carry forward your losses up to 20 years and offset the next 20 years of earnings.)

In making the payment in 2008, the payment’s interest is applied against this year’s tax deductions instead of next year’s.  And lest you think you’re paying “in advance”.

Should you do your own taxes?
Please Note some Tax laws changed in recent month, total deductions and credits could have changed.
It is better to work with a CPA rather than doing your own taxes.
Having a business is complex. Studies show doing your own taxes had 11 times greater error rate. This increases your chances for an audit, If you use a CPA you can sue them if there is an  error.

How do you find a good CPA?
Feel Free to contact me and I will align you with a Tax Professional in my Network.

Sources.
IRS.gov (2008)
Kier Education Resources; Income Tax Planning (2008)

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