End Of Year Real Estate Tax Tips Part 1

Many of you have been asking me for real estate tax tips as we get closer to the end of the year, So here are a few helpful end of year real estate tax tips:

Tip #1. Consider deferring your income

Income is taxed in the year it is received – so it may be advantageous to delay paying tax until tomorrow rather than paying it today particularly if you expect to be in the same or lower tax bracket next year. Your situation may vary depending on if you are an employee or if you are self-employed.

If you are an employee, for tax purposes, you may want to consider deferring a year-end bonus until next year.

If you are self-employed, consider delaying billings until late in the year to ensure that you won’t receive payment until the next tax year. It’s very important that you make your decisions based on your specific financial situation.

Tip #2. Take some last-minute tax deductions

Just as you may want to defer income into next year, you may also want to lower your tax bill by accelerating deductions this year.

For example, contributing to charity is a great way to get a deduction and you can augment the tax benefits of your generosity by donating property rather than cash. Furthermore, as long as you’ve owned the asset for more than one year, you get a double tax benefit from the donation: You can deduct the property’s market value on the date of the gift and you avoid paying capital gains tax on the built-up appreciation.

Other expenses you can pre-pay include a property tax bill due early next year. (Note: speeding up deductions could be a mistake if you’re subject to the alternative minimum tax).

Tax Tip #3. Account for refinancings

If you lowered your mortgage interest rate in the past year, you may now have a lower interest deduction. Also, if you used any of the proceeds for something other than physical improvements to your home, that amount may be subject to the alternative minimum tax (AMT). Also, points paid in prior refinancings that you haven’t already deducted can be deducted the year you refinance again.

Stay tuned for part 2 of my end of year real estate tax tips.

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