Tax season: Jackson Hewitt Chief Tax Officer shares tips for homeowners, newlyweds, and parents

Jackson Hewitt Chief Tax Officer Mark Steber joins Yahoo Finance Live to discuss tax filing tips for first-time homebuyers, first-time parents, and newlyweds.

Video Transcript

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- If your tax situation looks a bit different this year, perhaps a bigger family, new home, new spouse, we've got you covered with Yahoo Finance's Ultimate Tax Guide. Let's go to Yahoo Finance's Brad Smith. Hey, Brad.

BRAD SMITH: Hey. What's going on, Rachelle? Well, so you're a new homeowner perhaps out there watching. You got a swanky new setup. You've got the little garden gnome outside. You've got something on the inside to the tune of a new swanky couch in your new place.

But, remember, that new property, of course, means big changes for your taxes this year. And so we're going to break that all down. Mark Steber, who is the Jackson Hewitt chief tax officer, he's got all the answers for you that you need to know. Mark, a lot of people are in a crunch right now. And for new homeowners out there, the first-time homeowners, what do they need to know?

MARK STEBER: Well, I'm often asked, my tax return is so simple. Can I do it myself? And I said, maybe, possibly, probably not.

But there are a few things to watch for in life. Life changes drive tax changes. And the single biggest life change that drives the most tax changes-- and we'll talk about them in a moment-- is purchasing a home, maybe not the first year, because it depends on when you buy the home-- early part in the year, the latter part of the year. A lot of those items might not make it through to your tax return-- mortgage interest, property taxes, points on your mortgage, refinancing, a lot of other things that go into it.

But once you're a homeowner, there is no question, it's unequivocally clear, you are no longer a simple tax return. Maybe not that first year, again, but after the second year, when you've got a full year of home payments, full year property tax assessments, a full year of all the other things that go with being a homeowner-- home improvements, line of credit, equity line-- those make your tax return complicated. You glaze over that and put that to the side and just say, it's like last year, and I'll just do it on a simple, easy form with the standard deduction, you're throwing money away. There are a lot of tax benefits that go to a tax return. They start with what I call the anchor tenant buying a home.

BRAD SMITH: Buying a home. OK. So what if I already had a home now? What if I renovate that house? What if I'm acting brand new out here and just trying to make sure that I've got that new experience that I've updated my house with? What if I've made those renovations to the home?

MARK STEBER: Well, renovations in and of themselves are not tax deductible. That's not a tax break, like charitable donations or property tax.

BRAD SMITH: It changed the value of the home, though.

MARK STEBER: It changes the value. And, more importantly, it changes the basis because at some point, you may sell that house. And if you have gain or the United States tax law, you might have taxable gain. Now, there's a lot of rules way beyond the scope of this conversation. And a large portion of it's tax exempt now under some recent changes. But you do need to know the basis of your home so you can calculate the accurate gain, so you can determine whether or not that it is a taxable gain or exempt gain.

Now, there are also sales tax associated with a lot of that. And that goes back into that bucket of what do I need to keep track of? Well, your mortgage interest is one of them. Clearly that's deductible.

Property tax is the second one. Most people who have a home with equity, line of credit, interest is tax deductible, potentially.

Then once you're an itemizer versus a standard deductible on a tax return, you get to add a bunch of other things, like charitable donations, medical expenses, and other things that you can add on to your deductions for a tax return. But it all starts with that large mortgage interest deduction piled on with property taxes. And if you're in some of the high Northeastern states, that can add up pretty quickly because under the United States system, you get one of two deductions.

Everybody gets a standard deduction, depending on your marital status. If you're single, it's about $12,000. If you're unmarried with a dependent, it's about $18,000. If you're married, you've got about $24,000. You get that.

Now, if you have itemized deductions-- mortgage interest, property taxes, sales taxes, medical, charitable donations-- you get the bigger of the two. And so if you don't own a home, you're probably in the standard deduction category. But, as I said when we started, once you move into the I own a home, mortgage interest and all those others pile up pretty quick. So it's in your best interest to understand what the rules are, what you need to capture, and then throw all that on your tax return and get the biggest refund that you can.

BRAD SMITH: Now, say, for instance, because we got a lot of people that Airbnb a home that they do own as well, how does that change the calculus, the filing for taxes as well?

MARK STEBER: Well, when you own rental property, which is what an Airbnb is, you're technically self-employed. You've got a small business now. And there's a whole host of rules that go with that, the starting of which is if you got income, unless it's a de minimis and there's a special 14-day rule. If you don't rent more than 14 days, there's a great loophole it says you can just ignore that. You just keep that money, put it in your bank account. You don't have to tell anybody about it. 14 days. Go past the 14 days rule, you're just like, call it any big realtor that owns big malls or any big building.

BRAD SMITH: I'm Brookfield at that point.

MARK STEBER: You're a big realtor but on a smaller scale. So you get to take things after you include your income that are deductible. To your point earlier, you get to take depreciation or cost recovery of the home that is rented. You get to take business expenses. Say you have a cleaning service, an extermination service. Say you have all the other things that go with owning and maintaining a property. Those can be tax deductible related to your Airbnb.

You shortcut the deductions, where I see most people make a mistake, and you just include the income, you pay too much in tax. And that's just not right. And the IRS is not going to catch that for you. They'll catch it if you leave off the income. But they won't catch that you have all these deductions-- travel expense, maintenance, repairs-- all the other things that go with owning a home, tax deductible, which offset that income.

BRAD SMITH: I want to switch gears here because I've got to kind of hustle to my finish. But let's talk about those who have some new nuptials out there, the newlyweds, the happy couples that have gotten married. How does that impact their taxes?

MARK STEBER: Well, you picked these great in order. Did I give you these? I'm not even sure how you got these. But second from the buying of the home, the single largest tax impact on a tax return is getting married or getting divorced because when you're getting married, it's not as simple as 1 plus 1 is 2.

It can be 1 plus 1 is 3 because you have two sets of income that can be added together. You may very well be in a higher bracket than you were as singles. Or you may marry someone who just likes owing and every year. And you're happy with that $10,000 refund that you get every year.

You file your first married tax return, your refund is gone. Well, maybe your spouse is one of those pay late people. Then that refund shock or, worse, balance due trauma is something that I see right after everybody gets married.

So if you're planning to get married, sit down with your tax pro or just sit down yourself and walk through what it's going to look like so you don't have the postnuptial shock because when you get married, everything changes. You embrace and absorb not just your spouse for life and their family history and in-laws. You absorb their tax history, good and bad. So if you've married someone that's got tax skeletons in the closet, you own that, too. So it's good to do a little bit of homework and find out what your tax refund situation is going to be looking like, what's your tax due situation might be looking like, and avoid any tax shock trauma from getting married.

BRAD SMITH: The only mention of skeletons that are like is the song by Stevie Wonder. So, Mark, just as we were speeding along here, what if you got a divorce on the other side of that?

MARK STEBER: Divorce is an equally huge change in your tax filing status. And a lot of things change, depending on a lot of factors. Do both people work? Does one person work? Do they get alimony? Do they get child support? All of which can have dramatic tax changes and also which can have some changes that were not the old rules that you might have thought existed five and six years ago.

So there are changes to what those rules are on child support, alimony being chief among them, no longer deductible by the payer. But getting a divorce has a traumatic difference in tax results year before, year after. So you certainly want to talk with a tax pro and find out where you are.

And I'll even say this. You don't want to wait till tax day on any of this. You don't want to sit there at midnight with your tax pro going, all right, we got married and bought a house and got divorced last year before I got married. That will lead to some big surprise when you're sitting there.

Do a midyear checkup. Do a post transaction kind of an estimate. A lot of people work on that during the summer. It's a best practice.

BRAD SMITH: Mark, trying to keep all of our viewers from being part of the Funky Bunch out here. Mark Steber, Jackson Hewitt chief tax officer, thanks so much for the time and the tips as well.

MARK STEBER: Good to be here.

BRAD SMITH: Absolutely. I'll toss things back on over to you, Rachelle.