| Q: |
Are taxes on second homes deductible? |
| A: |
Interest and property
taxes are deductible on a second home if you itemize. Check with your
accountant or tax adviser for specifics. |
|
| Q: |
What home-buying costs are deductible? |
| A: |
Any points you or the
seller pay for 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.
|
|
| Q: |
Are seller-paid points deductible? |
| A: |
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. |
|
| Q: |
What are the rules on capital gains
when inheriting a house? |
| A: |
When children inherit a
home, the Internal Revenue Service determines their basis in the
property on the date of the person's death. The cost basis is not the
amount the owner originally paid for the house. It is the property's
fair market value on the date of the mother's death, says Pamela
MacLean, assistant public affairs officer with the IRS.
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. Assume the property was
divided up equally. If one of the three siblings sold her share, she
must pay capital gains tax for whatever profit she made over one-third
of the new basis, MacLean said.
Other tax consequences include estate taxes. However,
the estate must total $600,000 or more before tax issues become a
concern. The IRS allow residents to pass on property, cash and other
assets worth up to a total of $600,000 before charging the heirs any
taxes, according to MacLean.
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. Other resources: IRS Publication 448,
"Federal Estate and Gift Taxes." Order by calling
1-800-TAX-FORM.
|
|
| Q: |
Can I deduct the loss I suffered when I
sold my home? |
| A: |
The IRS allows no
deductions for losses on the sale of your own home. There's no way to
use a loss to your advantage on your income tax return. It won't matter
what type of misfortune you may have run into, write Edith Lank and
Miriam Geisman in Your Home as a Tax Shelter, Dearborn Financial
Publishing, Chicago; 1993. |
|
| Q: |
Where do I get information on IRS
publications? |
| A: |
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"
Order by calling 1-800-TAX-FORM. |
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