A U.S government report estimates the average person pays $400 each year because of missed tax breaks and savings incentives (401K, Roth IRA and IRA plans). African Americans pay even more because of a lack of knowledge of current tax laws - and lack of money to hire professional consultation.
For example, according to a 2002 Government Accounting Office report, would you believe nearly one million people failed to itemize there home mortgage interest? This alone cost those homeowners over $473,000,000? (Ouch!)
One of the biggest advantages of home ownership continues to be the generous tax deductions the Federal and State Governments allow you to take each year. But despite the generosity of the government (how often do you hear that statement) many Black homeowners miss money saving deductions each year.
Another key to taking the best advantage of owning a home is tax planning. The best way to use your home to lower your tax burden next year is to start planning this year. Take the time to consult with a qualified tax planner to set up an effective action plan.
Here are points to consider when preparing your taxes this year and developing a tax plan for next year. Make sure you consult with a qualified tax professional before acting on any of these suggestions.
1. Federal Tax Credit for Energy Efficiency.
A tax credit can give you a major savings. A tax credit will lower the income tax you'll have to pay. The difference between a tax deduction and a tax credit is major. A tax deduction only reduces your income taxable income, a tax credit brings down the tax itself (big difference).
Note: As of this writing, 2007 is the final year to claim a tax credit for an energy efficient home improvement. You have until April 15, 2008 to take advantage of this tax credit on your 2007 income tax return for home improvements done on your personal home that qualify.
2. Missing or Misusing the Earned Income Tax Credit.
An earned income tax credit is a refundable tax credit created to reduce or eliminate the taxes that low-income married or single working people pay (like payroll taxes, for example) and often acts as a wage subsidy for low-income workers.
Unfortunately lawmakers (Congress) made it one of the most confusing tax code provisions. To give you an idea, the IRS itself reports failure to claim the earned-income tax credit as it number six top taxpayer mistake.
Guess what the number seven taxpayer mistake is. Incorrectly claiming the credit. So make sure you have a sharp up-on-there-game tax consultant for this one. But if you qualify it's worth it.
Many of the single mothers and low income families have a problem. With the tax credit designed to help them, many lack the tax knowledge or money needed to hire a professional to claim those dollars. For help with this problem Click Here!
3. Don't Forget The Point.
If you bought your home this year and it's your principle home you may deduct the points you paid to get the mortgage. This loan fee qualifies as an itemized interest deduction in the year you bought your home. You can check the IRS Form 1098 your lender sent you in January or February. You'll find the proof of payment on your loan closing papers.
4. Deduction Romance with Refinance.
If you refinanced your mortgage in 2007, you must deduct the mortgage refinance fees over the life of the mortgage. For example, if you refinanced and paid loan fee points to secure the loan, the loan points are not fully deductible in 2007. Instead, you must deduct the cost over the life of the loan.
5. Prepayment Penalty Positive.
If you paid off a mortgage early, triggering a prepayment penalty, you can deduct that expense on your Schedule "A" income tax interest deduction form.
6. Don't Forget to Count Your Escrow Account.
Double check your escrow impound account if you have one. Don't forget to double-check and deduct you property taxes paid in 2007.
Note: Make sure you double-check whether your lender paid the tax collector in the year you claimed the deduction. For example, just because you made the payment to your lender on time doesn't make the amount tax deductible - unless the tax collector received it before December 31.
Conclusion
As the 2007 tax deadline closes in, make sure to make it a personal resolution to save all the money you can from Uncle Sam's clutches. The key as always, is current information and action. Millions of dollars go into government coffers from uninformed taxpayers (by accident) - because of not knowing, now hopefully you won't be one of them.
Roy Primm Founder and Publisher of BlackHomeOwnerNews.com the largest source of information for black homeowners. Find one of the largest selection of African American Home Decor [http://www.blackhomeownernews.com/africanamericandecor.html]
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