If you want to avoid feeling that April rush and risk having to file for an extension, we suggest you get started on your taxes now. While it's true that you can't hide from the tax man, he also doesn't have to be that scary—as long as you take advantage of the proper deductions available to you. New York City co-op and condo owners get several types, but even if you're a renter, you might be able to write some things off, too.
[Note: This story was originally published in March 2015, and was updated in February 2017.]
One particular deduction that we really appreciate (and is available for renters and owners), is the spring cleaning credit, or at least that's what we're calling it. Donate the stuff you clean out to Goodwill or another charity, get a receipt and you can write off the value of your donations.
Here's what else you should know:
If you own a condo or co-op:
• Mortgage interest
The interest you pay on your mortgage is deductible on your federal income tax, as long as you have less than $1 million in debt on all of your mortgages, explains certified public accountant Jonathan Medows, whose firm handles the tax needs of all types of New Yorkers, including freelancers, small business owners and high-net-worth individuals.
There's a slight caveat when it comes to co-ops, though. In order for your interest to be tax deductible, you have to live in a building in which 80 percent of the income comes from tenants, (in other words, not renters). Also, note that if you're married and filing separately, your debt cap is $500,000, rather than $1 million.
Plus, if you work from home, you can deduct a part of that interest payment off as a work expense, Medows explains. (Read more here.)
• Property taxes
Real estate taxes should be filed as an itemized deduction on your income tax return. As the owner of a condo, you receive a tax bill directly, but if you're the owner of a co-op, the management must tell you what portion of the tax bill you pay (since it's part of your maintenance).
If you work from home, you can also include a percentage of your property taxes as a business expense and write those off. (Read here for more.)
• Home equity loans/renovations
Home equity debt of up to $100,000 is deductible (or up to $50,000, if you're married and file separately), so that's helpful news if you've financed your renovation using a home equity loan. Note: The renovation itself can be partly deductible if you work from home and your office space was part of the facelift.
If you are a freelancer who works from home (renter or owner)
To qualify for a deduction on your rent or your monthly payments, you must have an area that you use exclusively for your business, according to experts featured on an episode of WNYC's The Brian Lehrer Show. (Medows was one of them.) You can deduct a portion of your work-from-home expenses—including utilities and insurance—proportionate to the amount of space that your "home office" occupies in your apartment. In other words, if your home office makes up 10 percent of your apartment, you can deduct 10 percent of home-related expenses.
In addition you can deduct all of your home office furnishings, says Medows. Note that the IRS has very specific rules about home-office deductions; check with your accountant for what's appropriate in your situation.
You Might Also Like