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CPA in Orlando and IRS Important Home Buying Advice

As you start a small business, you may soon be looking to buy a home. Making your first home purchase can be exciting. However, if you’re not careful at every step, you could leave yourself vulnerable to overpaying in tax liabilities. If you decide to go this route, there are some important details you should keep in mind some tips from your CPA in Orlando. 

State and Local Real Estate Taxes

First, you are allowed to deduct real estate taxes on your home up to the $10,000 limit. According to Publication 530 from the IRS, “You can deduct real estate taxes imposed on you. You must have paid them either at settlement or closing.” That is to say, federal law allows you to put deductions from real estate taxes on your tax forms. As you prepare to record this information on your 1040, make sure to talk with your CPA in Orlando about itemized deductions(INSERT href link). 

Home Mortgage Interest

Second, you are permitted to deduct loans up to the limits between $750,000 and $1 million. If your loan was taken out before December 15, 2017, then you can deduct up to the $1 million mark. However, if your loan was started after December 15th, then you are only eligible to deduct up to the $750,000 mark. 

Some caveats apply, including if you are filing single or have received a refund on your mortgage interest. If you are a single tax filer, the limit is capped at debt up to $500,000. In case you received a refund of mortgage interest, then you will need to include that amount as income for the year. Ask your CPA in Orlando for further information on single filing, interest refunds and more.

Mortgage Insurance Premiums Deductions Solved by CPA in Orlando

If you have taken out an insurance policy against your mortgage, then you can take an itemized deduction for any premiums paid to insurance. Again, limits do apply to certain amounts and time frames. For example, if you have any mortgage insurance premiums which you paid before January 1, 2022, then it is not applicable to itemized deductions. In the case of prepaid mortgage insurance premiums, you must allocate them over the shorter of either:

  1. The stated term of the mortgage; or
  2. 84 months, beginning with the month the insurance was obtained.

If the mortgage insurance was provided by either a) the Rural Housing Service or b) the Department of Veteran Affairs, then you can deduct up to the full amount in 2021 if the contract was issued in 2021.

Why do Deductions Matter to You as a Homeowner or Business Owner?

This should be big news as housing likely makes up a large majority of your annual expenses. Getting deductions on your tax return is big news because it can mean taking away some or all of your tax liability for the current year. If you own your own business, this will help you even more in efforts to free up working capital and get a little more cash flow. This can help you get enough wiggle room to expand your business and reach the next level of growth you want. 

Why Tax Planning with Your CPA in Orlando is Critical 

Knowing what you can deduct ahead of time is especially crucial if you want to be prepared for tax season. As your accountant is often slammed with return after return during tax season, it can be more difficult to find a time when you can discuss and strategize your tax return and eligible credits or deductions. Instead, tax planning for the coming year can give you an advantage in your efforts to reduce tax liability while maximizing your deductions and credits.

CPA in orlando discusses plans with local small business owner

Business Structuring with CPA in Orlando Strategize Around Home Buying

Several business owners like you start out self-funding their ventures and experiences. A very common method of rapidly securing capital can be through home equity loans. Making a home purchase can mean a great deal if you, as a business owner, is looking to expand your business. Make sure that you make the right purchase within your means. Your accountant can help you determine what you need to take into consideration so that you don’t end up in the red. Verify that you have everything in order before you go ahead and make a closing deal. 

CPA in Orlando Making Sure you Are Ready for Home Ownership

Speak with your accountant before deciding to begin a search for your new home. Whether a first-time home buyer or buying a larger home, you need to take into account all of the additional expenses that come with a house. For example, you need to be prepared for the insurance, maintenance, tax and utilities required to keep up on the house. If you have enough to buy the house but not pay the tax and utilities, you could put yourself in a situation where you could be upside-down within a year. Don’t go in without the right plan and make sure that you are ready to crush the competition. You need to go above and beyond and plan accordingly such that your house leaves you with sufficient funds to keep operating your business and if you choose, leverage debt by taking out a home equity loan. Your CPA in Orlando can help you figure out the crucial figures so that you’re ready to go ahead and expand your business as your circumstances allow.

Wrap Up

Make sure to keep in mind the advice you get from your CPA in Orlando. Don’t fall into the trap of home-buying advice from social media. Keep track of any and all eligible expenses and don’t just leave stuff out to dry. If you forget important information, the IRS could come after you or worse yet, reject your return on the basis of your forgotten details. As you carefully document everything, it’s important to making sure that everything gets taken care of properly and allows for you to file on time. You shouldn’t just assume, instead you should take time and put in the effort and get it done right. 

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