| 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. |
|