Tax Season Prep: How Your Real Estate Transactions May Impact Your 2024 Filing
As tax season approaches, it’s essential to understand how real estate transactions from 2024—whether you bought, sold, or refinanced a home—could affect your tax filing. Additionally, remember that certain closing costs can be tax write-offs, offering even more opportunities to save. In Florida, where property values and homeownership play a significant role in personal finances, these considerations are especially important. Let’s break down the key tax implications with a focus on Collier and Lee Counties.
Home Sales and Capital Gains Taxes
If you sold a property in 2024, you may be subject to capital gains taxes on the profit. However, the IRS provides some exclusions:
- Primary Residence Exclusion: You can exclude up to $250,000 ($500,000 for married couples) of capital gains if the home was your primary residence for at least two of the last five years.
- Investment Properties: For properties not used as a primary residence, the gains may be fully taxable, but you can use a 1031 exchange to defer taxes if you reinvest in another qualifying property.
Collier County: With its high median home prices, many sellers may see significant profits. Consult a tax advisor to ensure eligibility for exclusions and to avoid surprises.
Lee County: With a more moderate median price, sellers may fall below the exclusion threshold but should still review potential gains carefully.
Source: IRS Publication 523
Property Purchases and Tax Deductions
Buying a home offers several potential tax benefits:
- Mortgage Interest Deduction: For mortgages up to $750,000, interest payments may be deductible. This is particularly relevant for higher-value homes in Collier County.
- Property Taxes: Florida homeowners can deduct state and local property taxes up to a combined $10,000 limit under the SALT (State and Local Tax) deduction cap.
- Closing Costs as Write-Offs: Certain closing costs, such as points paid on your mortgage or property taxes paid at closing, may be deductible. Be sure to review your closing disclosure to identify potential write-offs.
- Discounts for Florida Homesteaders: If you purchased a home in 2023 and filed for Florida’s homestead exemption, your property taxes for 2024 will be significantly reduced, though it won’t affect your 2023 tax filing.
Source: IRS Mortgage Interest Deduction
Refinancing and Mortgage Points
If you refinanced your home in 2024, you might be eligible to deduct points paid to lower your interest rate:
- Immediate Deduction: Points paid on a refinance can typically be deducted over the life of the loan. However, points paid for a loan on your primary residence may qualify for an immediate deduction if they were used to improve the home.
- Impact in Collier and Lee Counties: With fluctuating interest rates, many homeowners in Southwest Florida took advantage of refinancing. Ensure you’re claiming the correct deductions to maximize savings.
Source: IRS Publication 936
Home Office Deduction for Remote Workers
For homeowners using part of their residence as a dedicated workspace, the home office deduction may apply. However:
- This deduction is only available to self-employed individuals, not W-2 employees, due to tax law changes in 2018.
- Ensure the workspace is exclusively used for business purposes to qualify.
Source: IRS Home Office Deduction
Energy-Efficient Home Improvements
Florida homeowners who installed solar panels or other energy-efficient upgrades in 2023 may qualify for the federal Residential Clean Energy Credit. This credit equals 30% of the cost of eligible improvements.
Collier and Lee Counties: Many local homeowners are taking advantage of Florida’s abundant sunshine to install solar panels, reducing energy costs and tax liability.
Source: Energy.gov Tax Credits
Final Thoughts
Navigating the tax implications of real estate transactions can be complex, especially with unique considerations in Collier and Lee Counties. Remember, closing costs like mortgage points and property taxes paid at closing can offer additional write-offs to reduce your tax burden. Consulting with a tax professional familiar with Florida’s tax landscape is highly recommended to ensure you’re maximizing deductions and avoiding unexpected liabilities.
For more information or questions about how your real estate decisions may impact your taxes, feel free to reach out! info@thetitlelink.com or 239-423-5465
Disclaimer: This article is for informational purposes only and should not be considered tax advice. For specific questions regarding your tax situation, please consult a qualified CPA or tax professional.