Are seller-paid points
deductible?
Are taxes on second homes
deductible?
Can I deduct the loss I
suffered when I sold my home?
What are the rules on
capital gains when inheriting a house?
What home-buying costs are
deductible?
Where do I get information
on IRS publications?
Question:
Are seller-paid points deductible?
Answer:
As of Jan. 1, 1991, homeowners have been able to deduct points paid by the seller. This deduction previously was reserved only for points actually paid by the buyer.
Question:
Are taxes on second homes deductible?
Answer:
Mortgage interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.
Question:
Can I deduct the loss I suffered when I sold my
home?
Answer:
The Internal Revenue Service currently does not allow deductions for losses on the sale of your own home. In fact there's no way to use a loss on the sale of your principal residence to your advantage on your income tax return.
Question:
What are the rules on capital gains when
inheriting a house?
Answer:
When children inherit a home, the Internal
Revenue Service determines their basis in the property on the date of the
owner's death. The cost basis is not the amount the owner originally paid for
the house, but the property's fair-market value on the date of the parent's
death.
Cost basis is a tax term for the dollar amount assigned to a property at the
time it is acquired, for the purpose of determining gain or loss when it is
sold. For example, one of the three siblings sold his or her share of a property
to be divided equally, he or she must pay capital gains tax for whatever profit
made over one-third of the new basis.
Other tax consequences include estate taxes. However, the estate must total
$675,000 or more for tax year 2001 before tax issues become a concern. The IRS
allow residents to pass on property, cash and other assets worth up to a total
of $675,000 for tax year 2001 before charging the heirs any taxes. This figure
will rise each year for the next several years.
Regarding the transfer of ownership, quit-claim deeds often are used between
family members in situations such as this when an heir is buying out the other.
All parties must be agreeable to dropping a name from the title. For more
information, consult the IRS's Publication 950,
"Introduction
to Estate and Gift Taxes." Order by calling (800) TAX-FORM or
download from
irs.gov..
Question:
What home-buying costs are deductible?
Answer:
Any points you or the seller pay to purchase
your home loan are deductible for that year. Property taxes and interest are
deductible every year.
But while other home-buying costs (closing costs in particular) are not
immediately tax-deductible, they can be figured into the adjusted cost basis of
your home when you go to sell (any significant home improvements also can be
calculated into your basis). These fees would include title insurance,
loan-application fee, credit report, appraisal fee, service fee, settlement or
closing fees, bank attorney's fee, attorney's fee, document preparation fee and
recording fees. Points paid when you refinance an existing mortgage must be
deducted ratably over the life of the new loan.
Question:
Where do I get information on IRS publications?
Answer:
The Internal Revenue Service publishes a
number of real estate publications. They are listed by number:
* 521 "Moving
Expenses"
* 523 "Selling
Your Home"
* 527
"Residential Rental Property"
* 534
"Depreciation"
* 541 "Tax
Information on Partnerships"
* 551 "Basis of
Assets"
* 555 "Federal
Tax Information on Community Property"
* 561
"Determining the Value of Donated Property"
* 590
"Individual Retirement Arrangements"
* 908
"Bankruptcy and Other Debt Cancellation"
* 936 "Home
Mortgage Interest Deduction"
These publications are available for free online or by calling (800) TAX-FORM.