Filing taxes may become routine over the years, but the filing process can appear more complex when you have large expenses to take into consideration, such as the purchase of a new home or motor vehicles. While it’s best to be prepared with both the finances and knowledge when making big purchases and the impact it will have on your financial status, there’s always time to educate yourself on how to navigate filing taxes with large expenses. Below we outline some common substantial purchases and how they can affect the tax process.
Houses
Buying a house may be one of the most important purchases in your life, but it does come along with added work to your tax filing, as you’ll have more deductions to itemize. On the bright side, homes do bring some major tax benefits that could possibly end up saving you money. Typical scenarios where this applies include:
• First-time home buyers
• Purchase of additional homes
• Major home additions and/or renovations
The possible home deductions and credits you may be eligible for if you apply to any of the above scenarios includes:
• Property taxes
• Mortgage interest
• Mortgage points
• Mortgage insurance payments
• Home office space
• Certain home upgrades, i.e. solar and other energy efficiency improvements
• Waived IRA fees
Be sure to keep track of the tax documents related to the above deductions and credits as you receive them. It may be best to plan ahead and consult a tax advisor to ensure you are prepared well in advance with all the paperwork and documents needed to have time to make any adjustments, if necessary, when it comes time to file for taxes.
Motor vehicles
The purchase of a motor vehicle can include the following:
• Cars
• Motorcycles
• Motor homes
• Recreational vehicles
• Sports utility vehicles
• Trucks
• Vans
• Off-road vehicles
Motor vehicles can have numerous tax-deductible benefits. According to the IRS, taxpayers have the option to deduct the state and local sales tax on a motor vehicle purchase. It’s in your best interest to deduct this tax only if you paid more in the state and local sales tax versus what you paid in state and local income taxes, as it will save you tax dollars, so make sure to consult an accountant to see which option is better.
Take into consideration if your vehicle is being used for business, charity, moving, or medical purposes, as you may be able to quality for deductible mileage deductions. Financial experts can also help you determine if your motor vehicle qualifies for a vehicle registration deduction, which is based on the vehicle’s weight and value.
You may also qualify for the New Qualified Plug-In Electric Drive Motor Vehicle Credit
Aircraft
While purchasing an aircraft may only be applicable to a few, if you are an aircraft owner or plan on purchasing one then knowing the compliances with various aviation-specific tax regulations will prove beneficial. Since the sales and “use” tax for aircraft are administered by each state, you can work with a tax advisor to determine whether you are able to minimize or eliminate aircraft tax liabilities. In the past few years, the IRS has published rulings that favor aircraft owners who use them for trade or business purposes, meaning you can write off operating expenses and depreciation of business aircraft. Also, keep in mind the delivery locations of aircraft can potentially add to additional sales tax.
Reach out and schedule an appointment with the members of Emerald Financial Partners if you have made a significant purchase like the ones stated above in the past year, or if you have questions regarding whether your purchases qualify for deductions. We will be able to educate and assist you with filing taxes with large expenses. And also to accommodate the requirements needed for these large purchases that may be out of your knowledge. We understand the overwhelming process of tax filing and want to help!
Disclaimer: These are general guidelines, not set guidance or advice. Each business and personal situation is different and may require customized assistance based on their circumstances. Please consult Emerald Financial Partners about your specific needs.