Tax season is here. Whether you hire a pro or go it alone, you don't want to pay Uncle Sam any more than is absolutely necessary. You also want to minimize your chance of an audit. So how do you play nice with the IRS and save yourself some money come April 18, 2017? we've created this list to help you out.
1. You're overzealous with the home office tax deduction. The home office can only be used for a home office- not as a guest bedroom or part time craft room. It also has to be the primary location of your business.
2. Not following the guidelines for energy tax tax credits. There is a lifetime limit of credits you can claim and other rules apply. Check out this guide for the specifics.
3. Not Distinguishing Between Home Repairs and Improvements. According to the IRS, home improvements are things that increase the value of your home. Home repairs are things that restore your home to its previous condition, often after a natural disaster.
4. Not Deducting PMI. Home buyers who do not have a large enough down payment pay Private Mortgage Insurance (PMI). Luckily, a portion of your PMI is deductible if your loan was established in 2007 or later, the home is your primary residence and you meet the financial requirement.
5. You're Disorganized. Keep your documentation organized in case you're ever audited. File away charitable donation receipts, home improvement receipts, documentation proving PMI and everything else you've included on your taxes. If you have a professional do your taxes, keep the file that you share with them.