Take Advantage of the Homestead Exemption and Save!

Have you heard of the Homestead Exemption?  If you’re a homeowner this is an easy way to save money on your annual property taxes.  The process is simple – you must own the home, occupy it as your legal residence, and file appropriate paperwork with the county in which you reside.  Depending on the county, applications may be filed with the Tax Commissioner’s office or the Tax Assessor’s office.    

In order for the exemption to be counted towards the current year’s property tax bill, the application must be filed prior to April 1st.  Applications filed after the 1st will result in a loss of the exemption for that year.  In order to receive the homestead exemption for the current tax year, the homeowner must have owned the property on January 1.   

The state of Georgia offers homestead exemptions to all qualifying home owners.  Some counties have increased the amounts of their homestead exemptions to above the amounts offered by the State.  As a general rule, exemptions offered by the county are more beneficial to the homeowner than those offered by the state.    

How much can you expect to save?  The exemption varies from county to county and additional exemptions are available to homeowners with special circumstances (see below).  The basic homestead exemption saves most homeowners $250 to $600 on average each year.  That number increases to as much as $1200 if the home is in the city of Atlanta.  Additionally, the higher your property value, the greater the potential savings.      

How is the savings calculated?  The amount of your exemption is subtracted from the assessed value of your property as determined by the county tax assessor.  The remaining amount is then multiplied by your property tax rate to arrive at the amount of your annual property taxes.  For example, a homeowner in Cobb County with an assessed value of $100,000 who applies for the basic homestead exemption of $10,000 would only pay property taxes on $90,000.  If that homeowner did not file for the exemption, he/she would pay property taxes based on the full assessed value of $100,000.  

Other exemptions that you may be eligible for include School Tax (applicable when you reach age 62), Senior (applicable at age 65, income limits exist), Disability and Veteran’s Disability, Surviving Spouse and more.  Visit the county websites for guidelines and application information.

Looking for information on the Homestead Exemption in your county?  Visit the links below.

County Exemption Information and Applications:  

*This blog was originally posted in January 2018 and has been updated to include new county links and additional information.  

Landlord? Don’t Overlook This Important Tax Info

Many Americans own rental property. Whether you inherited a home, decided to downsize or upsize your personal residence, or just came across a great investment opportunity, people get into the landlord game for many different reasons and via many different avenues. Regardless of which category you fall into, all landlords must be sure to keep detailed records of income and expenses related to the property for tax time.

Deductions
If you are making money from the rental of a property that you own, then you must report the rental income on your tax return. Owning a rental property also means that certain expenses become deductible – thereby reducing the total amount of rental income that’s subject to tax.

Deductions vs. Depreciation

Deductions are very straight forward – these are the costs of operating, repairing, some improvements, and managing your rental property. These expenses should be tracked by the landlord (or his/her employee) and included, along with rental income, on Schedule E of the tax return. Depreciation, on the other hand, is not as straight forward. Generally, the basis or cost of the building (but not the land) is depreciated using straight-line depreciation which is done over 27.5 years. An equal amount of the building’s basis is deducted each year on the tax return. Any additions or improvements costing more than $2500 are also depreciated but are done so separately from the building. Additions or improvements costing less than $2500 can be deducted fully in the year of purchase.

Depreciation must be carefully tracked for tax purposes. Once the property is fully depreciated, no additional depreciation can be taken. Additionally, when a rental property is sold, the depreciation must be recaptured if the sale price of a rental property exceeds the adjusted basis (i.e. the owner’s initial investment plus the cost of certain improvements during ownership). Recaptured depreciation is reported as ordinary income for tax purposes.

Reporting Income and Expenses
At Levesque & Associates, we recommend clients track income and expenses either through bookkeeping software such as QuickBooks (appropriate if you own multiple investment properties) or through a simple excel sheet. You can also easily make use of apps such as Expensify to maintain and categorize receipts. Even though you are tracking the information, be sure to keep receipts with your personal records for at least 7 years.

Management Companies
Some property owners utilize a management company for collections of rent payments as well as property maintenance and other expenses. Typically, these management companies provide a 1099 in January of each year which summarizes the income earned by the owner. If you utilize a management company, we STRONGLY encourage you to keep your own records and compare the information you receive from the management company with what you have on file. Mistakes do happen and property owners should take responsibility for ensuring the accuracy of the of the information reported to the IRS.

Record Keeping
Good record keeping will not only help you determine the profitability of your rental property, but it will help make the preparation of your tax return much easier. Maintain records of everything related to the property. This includes keeping detailed receipts for any expenses such as repairs and improvements. You should also keep detailed records of all rental income received. Should you be selected for an audit, you will need to provide these records to the auditor. If you are audited and cannot provide proof of the expenses and income reported on your return, you may be subject to additional taxes and penalties.

 

 

Do you own a rental property? Make sure you are keeping records of the following items and providing to your tax professional at tax time:

  • All loan and interest payments
  • Repair receipts
  • Personal property costs (such as new appliances or lawn equipment)
  • Driving – if you have to drive to your rental property for any reason, you can either deduct actual auto expenses (gas, upkeep, repairs, etc) or mileage (learn more about mileage write-offs here).
  • Overnight travel, including airfare, hotel costs, meals, and other expenses, can be deducted if they are directly related to your rental property. Be sure to keep detailed records as the IRS is known to scrutinize these kinds of deductions.
  • Home office expenses, provided the landlord meets certain minimum requirements. This includes a percentage of the cost of home expenses including utilities, insurance, and more. Your tax professional will require total square footage of your home, square footage of dedicated office space, and a total of home costs
  • Do you pay an employee or independent contractor for help with your rental? Their pay is a rental business expense.
  • Any insurance you carry related to rental activity should be kept and provided at tax time.
  • Fees associated with legal and professional services such as an attorney, accountant, management company, etc.

Looking for more information? Get in touch with Levesque & Associates by phone or email.

Get Organized for Tax Season

There’s no need to wait until the last minute to start getting ready for tax season.  Whether your tax return is prepared by a professional or you complete the process on your own, staying organized throughout the year will help make tax time a little bit easier.  Staying organized will also help reduce the likelihood of an error, helping to ensure the accuracy of your return and reduce the risk of an audit.

As tax deadlines approaches, we always hear clients say, “I’m trying to get everything together!”  Many tax payers have large amounts of documentation and information to gather for the preparation of their annual tax return.  Some of these items only come around every few years and are easily forgotten or overlooked.  For example, most people don’t buy or sell a home every year, but your Settlement Statement or Closing Disclosure documentation is important information to include on your tax return.  Other times clients will receive excessive documentation from a company and they are unsure which pieces are necessary.  If you have investments, for example, you probably receive monthly statements as well as an end of year statement.  You should also receive a Consolidated 1099 – that’s the only document truly needed for your taxes (all pages, not just the cover sheet).  Additionally, if you have multiple investment accounts, you will receive documentation for each individual account and they may not be sent out at the same time (even if they are with the same company).  This leads many clients to believe they have received everything when, in fact, they are missing important information.

How can you make tax season organization easier?  The simplest way is to have a designated folder – either physical or electronic.  When documents are received they automatically go into the folder.  If there are two tax payers in the home, make sure both spouses know about the folder and its location.  It won’t be effective if one partner is putting documents in the folder while the other is placing them in a drawer somewhere else.  Take your organization a step further by including a checklist with your document storage.  “It’s not something most people want to think about, but if you take a few minutes after filing your taxes to go ahead and make a quick checklist for next year while the information is fresh, most clients find it goes more smoothly when the time comes to get organized,” reports Chelsea, Levesque & Associates Office Manager.  “It’s as simple as W-2, 1098, 3 investment statements, childcare, home office, mileage, donations, etc.  Making note of what you needed for your return this year will help guide you as you gather information next year.”

If you’re feeling like an organization pro, leverage technology!  SmartVault is a secure storage solution that is free to Levesque & Associates clients.  With more companies starting to deliver information electronically, it’s simple to upload the documents to your personal vault.  When tax season begins, much of what you need will already be available to your accountant without you having to lift a finger!  Paper documents that you receive can be scanned and uploaded thereby reducing the need to store (and potentially misplace) paper.  Don’t have a scanner?  No problem!  Tons of scanning apps exist for Apple and Android devices.  Check out a list of a few here.

If you don’t have access to SmartVault, electronically storing your documents and information is still a great way to reduce any potential headaches when it’s time to get ready for tax season.  It minimizes, and sometimes even eliminates, the need to locate paperwork.  Additionally, it’s ready to be sent to your accountant via email or through another form of electronic uploading.  Look into secure storage options like Dropbox or Google’s OneDrive.

Not all information needed for tax purposes comes as a document mailed or emailed to tax payers.  Many people will have business expenses, mileage, home office costs, and more.  “I always tell clients to keep receipts in case the IRS comes knocking one day, but so many options are available to limit the storage needs and make tax season go more smoothly.  Apps exist for receipts and mileage.  I personally use them every day.  Other clients choose to track information in an Excel document that they send to me when it’s time to prepare their return.  There are also many affordable bookkeeping programs available for those who require a more robust solution for tracking information,” stated Conrad Levesque, CPA, Owner of Levesque & Associates.

Whichever method(s) you choose for the storing and disbursement of your tax information, spending a little time staying organized throughout the year will make your life much easier when tax season comes.

Questions about your documentation needs or interested in accessing your personal Vault?  Call or email us – we’re happy to help!