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April 15^th will be here before you know it, now is the perfect time to review the latest changes to the tax laws to be sure you don’t miss out on the many tax benefits available to homeowners.

1. Property Taxes

You may deduct up to $10,000 ($5,000 if married and filing separately) of property taxes in combination with state and local income taxes or sales taxes.

2. Mortgage Interest

You can deduct a portion of the interest you paid depending on when you took out the mortgage:

• Dec.16, 2017, and later: You can deduct the interest on up to $750,000 of mortgage debt (or up to $375,000 if you’re married and filing separately).
• Oct. 14, 1987, through Dec. 15, 2017: You can deduct the interest on up to $1 million of mortgage debt ($500,000 if married and filing separately).

If you refinanced a mortgage, the limit depends on your old loan’s origination date.

• If the mortgage predates Oct. 14, 1987, all the mortgage interest may be deductible.

3. Home Equity Loan interest

Interest on home equity loans and home equity lines of credit can be deducted only if you spent the borrowed money on home improvements.

• If your first mortgage is over the deductible limit, the home equity loan interest won’t be deductible.

4. Discount Points

If you’re within the limit to deduct all your mortgage interest, you may also be able to deduct discount points you paid when the mortgage closed.

5. Home Office Expenses

if you’re self-employed and use part of your home regularly and exclusively for your business, you can take a tax deduction of $5 per square foot, for up to 300 square feet of office space, to a maximum deduction of $1,500.

• See the IRS website to determine whether your home office qualifies for a tax deduction or play it safe and consult with a tax professional.

6. Medically Necessary Home Improvements

You can deduct the cost of installing medically necessary home improvements that benefit you, your spouse or a dependent:

• Permanent improvements that increase your home’s value are only partly deductible. The deductible cost is reduced by the amount of the property value increase.
• However, many accessibility improvements, such as entrance ramps, widening doorways or installing railings, usually don’t increase the value of a home and can be fully deducted.

7. Solar Energy

• Between January 1, 2017, and December 31, 2019 – 30% of the expenditures on solar energy are eligible for the credit.
• Between January 1, 2020, and December 31, 2020 – 26% of the expenditures on solar energy are eligible for the credit.
  
• Between January 1, 2021, and December 31, 2021 – 22% of the expenditures on solar energy are eligible for the credit.
  

8. Tax benefits to selling your home

If you’ve lived in your primary residence for two out of the five years before you sell it, you’re excluded from paying taxes on any profits up to:

• $500,000, if you’re married
• $250,000, if you’re single.

Claiming these tax deductions may only be worth the trouble if all of your itemized tax deductions exceed the IRS standard deductions, which were raised in 2017 with the passing of the Tax Cuts and Jobs Act.

The standard deductions for the 2019 tax year:

• $24,400 for married couples filing jointly
• $12,200 for singles and married individuals filing separately
• $18,350 for unmarried heads of households.

To decide whether to itemize, add up homeowners and other tax deductions you qualify for:

• If the sum is more than the standard deduction, then itemize.
  • If not, take the standard deduction.

Homeowner costs that are not tax-deductible

• Insurance premiums, including for mortgage insurance.
• Homeowner association fees.
• Transfer taxes or stamp taxes.
• Cost of utilities.
• Rent for living in the home before closing.
• Costs for getting or refinancing a mortgage, such as a loan assumption, credit report and appraisal fees.
• Depreciation
• Forfeited deposits, down payments or earnest money.
• Wages for domestic help.

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Although Northern California is blessed with some of the nation’s mildest winters, there’s still some home maintenance you can do to prepare your home for the cold winter months and occasional heavy rains ahead and help reduce your overall energy bill and heating costs.

Make Sure Your Heating System is Ready
If you have a high-efficiency heating system, it is recommended that PVC vent pipes be cleared of any obstructions yearly. For a gas system, cleaning is recommended every three years.

Cut Down on Heating Costs
As the weather turns colder, heating can account for over half of your gas bill if you have a gas heater and up to 40% of your electric bill for those with an electric heating system.

Below are some tips from the California Public Utilities Commission to help you get your home ready for the cold winter months and reducing that electric/heating bill:

• Program your thermostat lower when you’re sleeping or away from home.
• Clean or replace furnace filters once a month or as recommended.
• Keep warm-air registers, baseboard heaters and radiators clean and clear of furniture, carpeting, and drapes.
• Eliminate trapped air from hot-water heaters every season; you might want to call a professional for this one.
• Place heat-resistant radiator reflectors between exterior walls and radiators.
• Turn off kitchen and bath exhaust fans when you are done cooking or bathing.
• Open draperies and shades on your south-facing windows during the day to let sunlight in your home and close them at night to retain the heat.

Clean Gutters
Clear the gutters along the roof of your home of sticks, leaves, and other debris so the rainwater can drain properly.

Check the gutters in front of your house as well to be sure they are free of accumulated leaves from neighboring trees.  This will keep the water in front of your house draining when that first big rainstorm hits and reduce the chance of your street, driveway, or home flooding.  Direct the downspouts of your home’s gutters away from your home’s foundation.

Check the Fireplace and Chimney
If you use your fireplace, you should have it cleaned by a professional chimney sweep. Check for cracks in the chimney, creosote buildup, and debris, such as leaves or bird nests, which may become a fire hazard.

Check the Roof
Look for loose or missing roof shingles that may result in leaks during heavy rain. Check for any broken seals around vents and the chimney.  Be sure to clear leaves and other debris from flat roofs with a rake or leaf blower.

Reverse Ceiling Fans
Check your ceiling fan for a switch to reverse the fan’s rotation from counter-clockwise, which produces cool air, to clockwise, which will push the warm air that rises to the ceiling back down into the room.

Caulk Around Windows and Doors
If you can see any sunlight between your door or window frames or you can feel air seeping through, your home isn’t properly sealed. Places to check for drafts include windows, doors, lighting, plumbing fixtures, switches, and electrical outlets. Replace caulking and weatherstripping as needed.

Draft stoppers, which became popular during the Depression, are a cheap way to keep the cold out of the house. These days, you can find draft stoppers online in just about any shape, size or animal variety. 

Protect Patio Furniture
Keep your patio furniture clean and dry by covering your furniture with a heavy tarp or storing furniture in a shed or garage.

Check Batteries in Smoke and Carbon Monoxide Detectors Monthly
Make sure all smoke and carbon monoxide detectors are working in your home. The California State Building Code requires one smoke alarm be placed on each floor in non-sleeping areas, and one smoke alarm must be installed in each room where sleeping occurs, as well, one smoke alarm should be located in each hallway that leads directly to sleeping rooms. In addition, as of 2011, the California Health and Safety Code requires the owner of every single-family dwelling, as well as all dwelling units intended for human occupancy, to maintain a carbon monoxide device in each dwelling.  It is recommended to check the batteries in all alarms once a month to ensure they are in good working order.

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As the New Year approaches and goal setting begins, here are some New Year’s Resolutions to help put potential home buyers on the road to owning their dream home:

1. Make a list of your new home wants/needs.

2. Do your research on school districts and homes that are for sale in locations you like.

3. Save for a down payment, as well as closing costs, moving costs, home repairs/maintenance and other homeowner expenses.

4. Check your credit score.

5. Pay down credit card balances; avoid big credit purchases like new cars or furniture.

6. Prepare Federal Tax returns & W2s for the past 2 years.

7. Prepare bank statements for the past 6 months.

8. Prepare proof of any investment income.

9. Prequalify for a loan.

10. Start mortgage shopping to get the best rate.

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