Expanding Your Office at Home? There Could Be Tax Breaks

Automatic TRANSCRIPT

Get to sign a baby's babbling. Doesn't mean much, but it does. Especially, if there's no babbling at all little to no babbling by twelve months or later is just one of the possible signs of autism in children, learn more at autismspeaks, dot org brought to you by autism speaks and the Ad Council. Sure Money Briefing for Monday August Tenth I'm Jr Waylon for the Wall Street Journal. Many people have been spending more time at home than usual in the pandemic in some cases in close quarters with family. If the house is starting to feel a little crowded and might be worth tapping into record low interest rates to remodel add on or even by. If you make significant improvements your home, you can put that into the cost basis. You can raise the the price said that when you sell the house, there's less tax to pay are tax reporter. Laura Saunders will fill us in on some text tips for homeowners. After the break I asked what kind of family she wanted. She said a family like yours. Learn. More about adopting a teen at adoptuskids DOT ORG. You can't imagine the reward brought to you by the US Department of Health and Human Services, adoptuskids and the Ad Council. The current real estate market? Thanks to the pandemic? It's like something many of us have never seen before interest rates below three percent for the first time ever. But whether you want to tap into those rates to buy refinance, maybe just make your Home Office submit less like your closet. There are lots of tax advantages to be mindful of Wall Street. Journal tax. Reporter. Laura. Saunders joins us to discuss. So Laura ever since March people's homes are their office. Can they take a Home Office deduction when they do their taxes next year? It's a great question. Any answer is yes and no. If you're an employee, you can't take a Home Office deduction because Congress got rid of that deduction for employees. In the two thousand, seventeen overhaul, you can't do that. But there is a bit of a silver lining to this cloud, which is that your employer could reimburse you for all kinds of expenses during this pandemic emergency and the expenses would be deductible body employer and not taxable to you. So maybe your employer wants to give you a better chair or. Or Pay for your inked grace, you need it or or maybe better internet in some cases. The employer could take deduction for that and it wouldn't be taxable to you, but you couldn't deduct it yourself. Now, it's different if you own a business, if you own a business and you work in the business either full time or part time like you might have a regular job in this could be your consulting business on the side. You can still take a deduction for a Home Office and. The rule there is that it must be used regularly and exclusively for your business. So no putting a couch and a TV in there in watching sports on the weekends I was going to ask you about that. A lot of people are probably using a corner of the bedroom or the kitchen as their office. But you know, let's say they want to remodel be at some real office space, other tax breaks for that. Say if you're. You're a photographer and you want to put a studio into your house and maybe even extra expenses like if you went to improve the landscaping. So people like to come to your office Those are good questions for tax professional. If you are an employer ye then it's GonNa be harder although you can do improvements and deduct the interest on a home equity loan. Also, if you make significant improvements your home, you can put that. That into the cost basis, you can raise the the price so that when you sell the house, there's less tax to pay. You know you mentioned home equity loans. If people do remodel, that's one way to raise cash. Can they still deduct the interest in many cases? Yes. Now, what you can't do anymore is have a cash out refinancing. Say Your mortgage is four, hundred, thousand dollars and you want fifty thousand dollars to pay college tuition. Tuition and you refinance for four hundred, fifty, thousand dollars. In that case, the fifty thousand dollars for the tuition is the interest is not deductible. But if the fifty thousand dollars is to improve your home makes significant improvements your home, then you probably can deduct the interest on it, and yeah. Refinancing is another way to free up cash and the corona virus has upended the real estate market mortgage rates at record lows below three percent. How much mortgage interest can be deducted if your mortgage was in place before December fifteenth twenty, seventeen, you get deduction of. On Up to one million dollars of mortgage debt on up to two houses. That's not to one million dollar houses that see no mortgage debt of a total of million dollars for up to two houses. However, if your mortgage was taken out after twenty seventeen, then the limit is seven, hundred, fifty, thousand dollars on up to two houses, and so you have to keep that in my I'll give you a little twist. If you have an eight hundred, thousand dollar mortgage that was grandfathered because it was there before two thousand seventeen and you want another one, hundred thousand dollars to make improvements in your home, you can't do. Do that now because the limit would be seven, hundred, fifty thousand, but you still can deduct the interest on the eight hundred. Awesome. Good time to buy a home with a mortgage interest deduction lower taxes. Well, that's a great question and there's so many markets out there. That are really hot. The mortgage interest deduction was the long cherished cornerstone of homebuyers, but a lot fewer people are getting it than they used to, and it's not because of the limits as much as that the congress in two thousand, seventeen expanded the so called standard deduction, that's when you get if you don't write all your deductions down on schedule Aa. which include things like charity state taxes and mortgage interest. So I think the number of people, the number, a filers who claimed mortgage interest deduction went from thirty, three, million filers in two thousand, seventeen down to thirteen, million dollars in twenty eighteen, and that shows you the impact of that change So you still get a mortgage interest deduction, but whether it saves you any taxes is a good question, but there's one thing I want to say about this is really interesting that. That to very often because of the way the code was put together, a married couple will be less likely to get a benefit from deducting mortgage interest than a single person, and so singles for for complicated reasons are much more likely to get a benefit from deducting mortgage interest, and you know who's to say your office has to be an actual home. It might make sense for someone to social distance and live in an RV, or you know even a boat. Other tax deductions. There's well, yes, there are and th-. They've survived most of the cutbacks since the mid eighties you have been able to treat a motor home or an RV or a boat as your home. If it has cooking sleeping and toilet facilities and I know people who have done this you know they sell the house, they went off on the road with a nice RV for a couple of years they got alone. They deduct the interest. It's. It's perfectly okay. No. Come on somebody really gonNA come looking for a toilet. Well if it comes up, they'll, WANNA know. And as somebody pointed out to me got to be cooking facilities, not just eating facilities. So I guess you got to at least have a microwave or something like that. All right. That's wall. Street Journal Tax Reporter. Laura. Saunders. Laura. Thanks for coming on the show and thanks so much for having me and that's your money briefing. I'm Jr. Waylon for the Wall Street. Journal.

Coming up next