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Originally Published on Forbes.com
Hidden Tax Time Bombs That Sabotage Retirement
If you think your taxes are too high, you might be right, but don’t be so quick to blame Washington, or the percenters— be they the one, the 47, or the 99. You could be sabotaging your financial goals by making a couple of common tax-related decisions that seemed right at the time, but could come back to haunt you later.
Examples facing a growing number of people these days are the second home/rental income property and the home-office tax traps. Starting in the late 1980s, many families bought or built second homes in vacation spots, covering the overhead by renting them out during the high seasons. As owners of income property, they deducted the expenses of maintenance, mortgage interest, and depreciation of the structure. For years they enjoyed their off-season vacations, paid the mortgage out of rental income, and got a tax break, all while building equity in an appreciating asset. Now that more people are reaching retirement age with accounts upended by the Great Recession, an expedient solution is to sell the vacation home and sock away the cash.