Real Estate
(Taxes, Mortgage Interest, Points, Other Property Expenses)
This is archived information that pertains only to the 2002 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
I just bought a home. What can I deduct from the settlement statement?
If you bought your home, you probably paid settlement or closing costs in addition to the contract price. These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. If you built your home, you probably paid these costs when you bought the land or settled on your mortgage.
The only settlement or closing costs you can deduct are home mortgage interest, points that represent interest and certain real estate taxes. You, may, deduct them in the year you buy your home if you itemize your deductions. Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home.
You add certain other settlement or closing costs to the basis of your home. You include in your basis the settlement fees and closing costs that are for buying your home. A fee is for buying the home if you would have had to pay it even if you paid cash for the home
There are some settlement or closing costs that you cannot deduct or add to the basis of your home. These include fees and costs that are for getting a mortgage loan. For more information refer to Publication 530 (PDF), Tax Information for First Time-Homeowners, and Publication 936 (PDF),Home Mortgage Interest Deduction
References: I paid my mother's mortgage and real estate taxes last year. The house is in her name. Can I deduct the mortgage interest and property tax on my tax return?
Generally, you can deduct only taxes that are imposed on you. You cannot deduct the property taxes unless you are the legal owner of the property, nor the mortgage interest unless you are legally liable for the loan. Your mother cannot deduct the mortgage interest either because she did not make the payments. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; Publication 17 (PDF), Your Federal Income Tax for Individuals; and Tax Topic 505, Interest Expenses; and Tax Topic 503, Deductible Taxes.
References: My daughter and I own a house together. Her name is on the mortgage, but both our names are on the deed. Can we each claim half of the yearly interest and property tax on our income tax returns?
In order for both of you to claim one-half of the interest deduction, both of you must be legally liable for the loan. Since only your daughter is legally liable for the loan, only she can deduct the interest she paid. Since both of you are legal owners of the property, both of you may deduct one-half of the real estate taxes paid during the year. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; Publication 17 (PDF), Your Federal Income Tax for Individuals; Publication 530 (PDF), Tax Information for First Time Homeowners; Tax Topic 505, Interest Expense; and Tax Topic 503, Deductible Taxes.
References: 11.2 Sale or Trade of Business, Depreciation, Rentals: Rental Expenses & Passive Activity Losses (PALs) I own a duplex. I live on one side and rent out the other. Are my mortgage interest and property taxes fully deductible on Schedule E?
No. Assuming that the loan is secured by the duplex, only the mortgage interest and property taxes for the portion you are renting are deductible on Form 1040, Schedule E (PDF), Supplemental Income and Loss. If you receive one bill, you should prorate the rental portion based on square footage. Your portion can be deducted on Form 1040, Schedule A (PDF), Itemized Deductions, if you itemize and meet the requirements for Deductible Home Mortgage Interest. For more information, refer to Publication 527 (PDF), Residential Rental Property (including Vacation Homes), Instructions for Form 1040, Schedule E, Supplemental Income and Loss, and Publication 936, Home Mortgage Interest.
References: 12.7 Small Business/Self-Employed/Other Business: Income & Expenses Are excise taxes for a vehicle deductible?
It has to be a personal property tax, not an excise tax, in order to deduct it. Deductible personal property taxes are only those based on the value of personal property such as a boat or car. The tax must be charged to you on a yearly basis, even if it is collected more than once a year or less than once a year. To be deductible, the tax must be charged to you and must have been paid during your tax year. Taxes may be claimed only as an itemized deduction on Form 1040, Schedule A (PDF), Itemized Deductions.
References:
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