BY SHANNON ROXBOROUGH
No matter where second-home owners fall on the income ladder, when it comes to taxes, chances are they're paying their "fair share" and then some.
Washington politicians on both sides of the aisle continually find creative ways to take a bite out of one taxpayer or another with annual changes to the tax code.
Tax season comes right after the holiday season. And as the end of 2011 approaches, now is the time to make some shrewd last-minute moves to lower your tax bill.
Here are some things to consider:
Real estate taxes. The National Taxpayers Union says as much as 60 percent of real estate across the country is assessed at a higher figure than its current value. In vacation home markets across the country, communities have been reassessing and adjusting property values in response to declines caused by the weak housing market. Appealing may seem like a hassle, but it could result in many thousands in tax savings. Most cities and towns have a filing deadline so check with local officials for specifics.
Energy-efficient improvements. This is your last chance to claim a home-energy tax credit for making upgrades to your weekend, vacation or future retirement home. If you install new windows, doors, skylights, weather stripping, insulation or heating and air conditioning systems by Dec. 31, you can claim a credit of up to 10 percent of the cost (for maximum of $500). The catch is you can't use the tax break if you previously took advantage of $500 or more in credits.
Going green. An even larger tax credit is available to second-home owners who install renewable-energy systems like solar panels, small wind turbines or geothermal heat pumps by the end of the year. Do so, and you can claim a credit for 30 percent of the cost, including installation. Even if you opt not to this year, the credit will be in place until 2016.
Business expenses. If you're self-employed and use your second home for business, you can claim deductions for office supplies or equipment you buy before the end of the year. In 2011, the Section 179 deduction allows you to write off expenses up to $500,000 of the first $2 million you spend on computers and other big-ticket items. Plus, there's a 100 percent special depreciation allowance on purchases made and used after Sept. 8, 2010, and before Jan. 1, 2012. Next year, the depreciation reverts to its previous rate of 50 percent. You can also claim the home-office deduction proportionate to the amount of space used. For example, if 25 percent of your home is used for business, you can deduct 25 percent of household expenses.
Other ways to give yourself a tax cut:
Mortgage interest write-offs. As a homeowner, the biggest potential tax break can be found in monthly mortgage payments, since most of the money is applied to interest charges. Unless your mortgage is more than $1 million, all that interest is deductible on both your principal and second homes. And if you happened to access cash through refinancing or get a home equity loan or line of credit, up to $100,000 of that debt is deductible, too. Best of all, it applies not only to conventional residences, but also to boats, RVs and campers, as long as they have sleeping, cooking and bathroom facilities.
Washington politicians on both sides of the aisle continually find creative ways to take a bite out of one taxpayer or another with annual changes to the tax code.
Tax season comes right after the holiday season. And as the end of 2011 approaches, now is the time to make some shrewd last-minute moves to lower your tax bill.
Here are some things to consider:
Real estate taxes. The National Taxpayers Union says as much as 60 percent of real estate across the country is assessed at a higher figure than its current value. In vacation home markets across the country, communities have been reassessing and adjusting property values in response to declines caused by the weak housing market. Appealing may seem like a hassle, but it could result in many thousands in tax savings. Most cities and towns have a filing deadline so check with local officials for specifics.
Energy-efficient improvements. This is your last chance to claim a home-energy tax credit for making upgrades to your weekend, vacation or future retirement home. If you install new windows, doors, skylights, weather stripping, insulation or heating and air conditioning systems by Dec. 31, you can claim a credit of up to 10 percent of the cost (for maximum of $500). The catch is you can't use the tax break if you previously took advantage of $500 or more in credits.
Going green. An even larger tax credit is available to second-home owners who install renewable-energy systems like solar panels, small wind turbines or geothermal heat pumps by the end of the year. Do so, and you can claim a credit for 30 percent of the cost, including installation. Even if you opt not to this year, the credit will be in place until 2016.
Business expenses. If you're self-employed and use your second home for business, you can claim deductions for office supplies or equipment you buy before the end of the year. In 2011, the Section 179 deduction allows you to write off expenses up to $500,000 of the first $2 million you spend on computers and other big-ticket items. Plus, there's a 100 percent special depreciation allowance on purchases made and used after Sept. 8, 2010, and before Jan. 1, 2012. Next year, the depreciation reverts to its previous rate of 50 percent. You can also claim the home-office deduction proportionate to the amount of space used. For example, if 25 percent of your home is used for business, you can deduct 25 percent of household expenses.
Other ways to give yourself a tax cut:
Mortgage interest write-offs. As a homeowner, the biggest potential tax break can be found in monthly mortgage payments, since most of the money is applied to interest charges. Unless your mortgage is more than $1 million, all that interest is deductible on both your principal and second homes. And if you happened to access cash through refinancing or get a home equity loan or line of credit, up to $100,000 of that debt is deductible, too. Best of all, it applies not only to conventional residences, but also to boats, RVs and campers, as long as they have sleeping, cooking and bathroom facilities.
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