| 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. |
|
