The Home-Related Documents You Need to Prepare Your Tax Return

Whether it’s your first time getting ready to file your taxes or your fiftieth, it never seems to get any easier, does it?

After all, your life can drastically change over the course of the year (to say nothing of just how much state and federal tax codes can change over time)! Come filing time, with deadlines looming and pressures mounting, it can be daunting to take the full scope of your finances into account – particularly when you’re a homeowner.

For many people, preparing to file their taxes means asking one big, pressing question: “What home and mortgage documents do I need in order to do my tax return?”

Let’s see if the Real Group team can help! We’re only going to give the broad strokes here – as, we should admit, our knowledge beyond the working basics is somewhat limited.

It’s important to bear in mind that no one on the Real Group Real Estate team is, nor claims to be, a certified public accountant or experienced tax preparer. Our expertise lies in the variety of tasks that it takes to help our clients successfully buy and sell real estate around Chicago, and we are not using this space to offer tax advice.

What’s more, it should be noted that every tax filer’s situation will be unique, depending on a wide variety of facts and circumstances. Tax laws and regulations are also often in a state of flux, whether at the local, state, and federal levels (as anyone who spent any time watching the news in 2017 could tell you).

For all of these reasons, when it comes to matters having to do with taxes, we encourage you to consult with an experienced, professional tax preparer, who will be able to offer a much more thorough understanding of current tax laws, and help you gain a better grasp of your unique, individual situation.

With all that being said, here are a few of the home-related documents you may need to locate and have ready, come tax season:

Closing Statement/Settlement Statement

The closing or settlement statement is one of the most important documents you’ll receive when you purchase a home. This document, which has formerly been known as a "HUD," "HUD-1,"or "RESPA Statement,” contains a lot of important information, which will be relevant as you prepare your taxes every year.

Broadly speaking, this documentation acts as a receipt (of sorts) for your home, and itemizes the charges agreed upon during closing negotiations, which collectively indicate the “true value” of your home. Some examples of closing costs that may factor into this document include legal fees, survey costs, transfer taxes, and title insurance.

If you itemize your deductions, this document will contain valuable information that you may be able to use to secure deductions at tax time. The most important thing to remember is that you should always hold onto the closing statement for your home! Some items listed on it may be tax deductible immediately, and others may be deductible over time – so this is a form you’ll want to have on hand to reference for years and years.

Annual Mortgage Statement

Your annual mortgage interest statement, often known as “Form 1098,” is used to report mortgage interest, including points, paid to your loan holder. If you itemize your deductions, the amount of interest paid to your bank or direct lender is tax deductible, up to a certain amount. You’ll want to direct any specific further questions to a tax professional.

Property Tax Records

The property tax payments you made for the last year are also likely to be deductible. This information may be included on your Form 1098, but you may wish to hold on to your real estate tax receipts as a safeguard. Be sure to ask your tax preparer for any additional guidance!

Curious about how property taxes work in Cook County, Illinois? We’ve got a rundown of some frequently asked questions available here. Read on if you’re curious about due dates, exemptions, and what the tax situation looks like for buyers and sellers when a property changes hands.

Home Improvement Invoices, Receipts, and Proof of Payment

Home improvements made over the course of a year may be deductible when you file your taxes – in certain circumstances.

For instance, home improvements that have been recommended by a doctor – such as the addition of wheelchair ramps or lifts to a home – may be deductible as medical expenses, in certain situations. Similarly, the money you pay towards making your home more energy efficient or sustainable might also be eligible for certain deductions.

Hold on to all invoices and receipts dealing with the materials, labor, and supplies put toward home improvements that may be deductible when you file, so that you and your tax preparer can pore over them together.

When it comes to keeping documentation for tax purposes, it rarely hurts to be over-prepared. As a rule of thumb, consider holding onto the home- and mortgage-related documents that you receive over the span of the year, so that you and your tax preparer can make the most informed decision possible come filing time.

If you’re in the midst of tax preparation right now, the entire Real Group team is pulling for you! Good luck and best wishes from all of us!

Have any further questions? Looking for a referral for a mortgage, insurance, legal, or tax professional for more specific guidance? Ready to start your search for a new home? Whatever your Chicagoland real estate needs, the Real Group team is here to help! Drop us a line today to get the conversation started!

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