Save Money on Your Taxes by Bunching
June 25, 2018 | Tom Ashworth
Save Money on Your Taxes
Having low mortgage interest rates can be a drawback if the total interest and property taxes paid are below the amount paid for a standard deduction. If you plan a little you may be able to improve your situation at least every other year.
Anyone that keeps tabs on their taxes knows that you can deduct your qualified mortgage interest and property taxes on your schedule A on the 1040 tax form. If your deductions are lower than the standard deductions you don’t use them. See article “Home Mortgage Interest Deduction” written on April 3rd.
When you are looking at homes for sale in Texas Hill Country, you need to consider how buying a home can improve your tax situation.
It is common that deductions are taken in the year that they are paid. For instance, if you pay your 2012 property taxes in 2013, then it would not be deductable on your 2012 tax return. But if you paid both the 2012 and 2013 property taxes in 2013 they could be claimed on your schedule A for your 2013 return.
As you can see, by delaying payment of the 2012 taxes until 2013, the combination of 2012 and 2013 taxes might help you exceed the 2013 standard deduction and provide a higher itemized deduction.
You can also plan on “bunching” your other schedule A deductions, such as charitable contributions, medical expenses, energy improvements and other tax deductable items.
Since mortgage payments are paid monthly, your mortgage interest would not be bunched. But if you are looking at homes for sale in Texas Hill Country, you may want to time the market, so you get tax benefits. Sometimes it will pay to buy a home early in the year and sometimes it may be beneficial to buy it late in the year. Each tax payer’s situation is different.
Please discuss this information with your tax advisor to see how it can apply to your situation. The purpose of this article is to make you aware of the strategy.
Tom Ashworth is a Licensed by the Texas Real Estate Commission. License # 623386.