Many homeowners can be pretty busy during every season, especially when each member of the household may have their own commitment. There's maintaining a job, taking care of small children, and more. For these reasons, many homeowners neglect to make the necessary preparations for the annual tax season.
Given the importance of a proper, organised filing system for your personal financial records, here is a quick five-step checklist to ensure you have the necessary information and documents in order for tax time:
1) Check the Household Expenses
Taxes are an important document that can provide an insight into your financial standing. While you may be making ends meet, they can also reveal where your expenses are growing. When that figure comes in, you may discover that it's time to prioritise your spending.
Keep a hold of your bills and the costs that you're covering, from the electricity to the water. Listing your budget and having a log to use as a reference for your variables when accounting for your taxes is a must.
2) Look at Mortgage Interest Costs
Your tax situation can help you determine how your mortgage is contributing to your tax-filing situation. If you're still looking to purchase a home, you may want to keep a note of your current mortgage interest rate and how long you expect to be in the home.
Those two factors can help you determine your tax bracket and whether it makes sense to refinance your mortgage. If your mortgage is at an interest rate that far exceeds your current income, it may be a good idea to look at different financial arrangements.
3) Take Note of Any Home Improvements
If you're a homeowner, you're certainly aware that there are several expenses that are related to the maintenance of your home. Take note of any repair or renovation you had to make prior to tax season, no matter what scale the project is in.
For instance, changing frosted windows that led to higher electricity costs can be considered a repair project. Have a list of all the improvements you made so that you can account for them when it's time to file your taxes.
4) Keep Your Records
Whatever the case may be, every homeowner will want to hold on to all of their documents. If you're looking to refinance your mortgage, forms of proof like tax returns for the past two years will be necessary for your application.
While it might be frustrating, always remember that taxes are an essential part of the financial system, and it's a good idea to account for them accordingly. If you're a homeowner and have never filed your taxes, the receipts would be especially helpful.
5) Find and Claim Tax Deductions
If you can, claim all the tax deductions that you're entitled to. Especially if you're a homeowner that's trying to lower the tax rate of your home, you'll have to make sure that you're filling out every form that you can.
For instance, if you make regular repairs to your home, you can claim a percentage of that cost by writing down the expenditures you made in the previous month. You can then attach the bill to your tax return, which gets you to deduct more.
Tax season is important to pay attention to. In the event that you haven't been smart with your finances, you may want to consider refinancing your mortgage and buying a different home over the next few years.
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