| 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. |
|