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, certain points and certain real estate taxes. You deduct them in the year you buy your home if you itemize your deductions. You can add certain other settlement or closing costs to the basis of your home. There are some settlement or closing costs that you cannot deduct or add to the basis.
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 can include in your basis the settlement fees and closing costs that are for buying your home. You cannot include in your basis the fees and costs that are for getting a mortgage loan. A fee is for buying the home if you would have had to pay it even if you paid cash for the home.
Refer to Publication 530, Tax Information for first Time-Homeowners, for more information about settlement or closing costs and determining the basis of your home.
References:
I have a mortgage for my primary residence and a second mortgage for land that I intend to build a home on. Can the interest be deducted for the second mortgage?
No. Until you have started a home or have one built, the land would be considered an investment. The interest does not qualify as deductible mortgage interest. Refer to Publication 550, Investment Income and Expenses, for further information.
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 these either because she did not make the payments.
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 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. 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.
References:
Is interest on a home equity line of credit deductible as a second mortgage?
Normally, yes. To deduct interest you paid on a debt you must be legally liable for the debt. Additionally, you must be able to itemize your deductions.
References:
I refinanced my home last year and paid points. Are they all deductible this year?
No. Points paid solely to refinance your home mortgage cannot be deducted in the year paid. Instead, they must be deducted over the life of the loan. For more details, refer to Tax Topic 504, Home Mortgage Points, or Publication 936, Home Mortgage Interest Deduction.
References:
Is the interest paid on the loan for a lot (with no home on it) deductible as mortgage interest?
Generally the interest on a lot is not deductible as mortgage interest.
If you are planning to build a house, you can start deducting mortgage interest once construction begins. The following is from Publication 936, Home Mortgage Interest Deduction:
You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. The 24-month period can start any time on or after the day construction begins.
References:
We purchased land to build a home on. Is the interest on the mortgage secured by the land deductible?
In order for interest to be deductible as home mortgage interest, the loan needs to be secured by a qualified residence. A qualified residence is your principle residence or one other residence selected by you that you use as a residence. If you place a dwelling unit on the land and use it as a vacation home, it may qualify as your second residence. The rules defining a dwelling unit and the use of a dwelling unit as a residence are found in Publication 527, Residential Rental Property (Including Rental of Vacation Homes) in the section, Personal Use of Vacation Home or Dwelling Unit.
Once you start construction of your home, you may treat the home under construction as a qualified residence for a period of up to 24 months, but only if the home becomes a qualified residence at the time it is ready for occupancy.
References:
Is interest paid on a construction loan for a new home considered deductible mortgage interest?
You can treat a home under construction as a home qualifying for the home interest deduction for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy.
References:
I got a loan to buy some land. Later I got another loan for the construction of the house. After the house was built I got a third loan which paid off the first two loans. Is the interest on any of these loans deductible?
All three loans may qualify as home mortgage interest. Generally the interest on a lot is not deductible as mortgage interest. However, if you build a house on the lot you can start deducting mortgage interest once construction begins. For more information refer to Publication 936, Home Mortgage Interest Deduction.
References:
I pay interest on money borrowed to purchase land. I built a home on that land, but have no mortgage. Is the interest I pay for the land deductible? Where is it deductible on the return?
Generally the interest on a lot is not deductible as mortgage interest. However, since you built a home on the property, it would be deductible as home mortgage interest provided that the loan is secured by the house or the property.
References:
I took out a home equity loan to pay off personal debts. Is this interest deductible? Where do I enter this amount on my tax return?
If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. In addition, debt you incurred to buy, build, or substantially improve your home, to the extent it is more than the home acquisition debt limit, may qualify as home equity debt. Refer to Publication 936, Home Mortgage Interest Deduction, for more information.
References:
If I borrow money from my 401(k) to purchase a home, is the interest I pay back to my 401(k) deductible as mortgage interest on my 1040?
The mortgage must be a secured debt on a qualified home. Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. The term "qualified home" means your main home or second home. For details, refer to Publication 936, Home Mortgage Interest Deduction.
References:
May I deduct my home improvements and repairs to my home?
Home improvements add to the value of your home, prolong its useful life, or adapt it to new uses. You add the cost of improvements to the basis of your property.
Examples of improvements include putting a recreation room in your unfinished basement, adding another bathroom, or bedroom, putting up a fence, putting in new plumbing or wiring, putting on a new roof, or paving your driveway.
For a list of some other examples of improvements, refer to Publication 523, Selling Your Home.
Repairs maintain your home in good condition. They do not add to its value or prolong its life, and you do not add their cost to the basis of your property.
Some examples of repairs include repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering and replacing broken window panes.
Exception: The entire job is considered an improvement, however, if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home.
References:
Our home was seriously damaged by flooding last year. Are there special provisions for claiming a loss since our home is located in a declared disaster area?
Casualty losses are generally deductible only in the year the casualty occurred. However, if you have a deductible loss from a disaster in an area that is officially designated by the President of the United States as eligible for federal disaster assistance, you can choose to deduct that loss on your return for the year immediately preceding the loss year. In other words, you may treat the loss as having occurred in either the current year or the previous year, whichever provides the best tax results for you. If you have already filed your return for the preceding year the loss may be claimed by filing an amended return, Form 1040X. For additional information on disaster area losses (including flood losses), refer to Tax Topic 515, or Publication 547, Casualties, Disasters and Thefts (Business and Non-Business). Publication 584, Non-Business Disaster, Casualty, and Theft Loss Workbook, can be used to help you catalog your property.
References:
Our garage caught fire this last July. Can we claim a loss on our income tax return?
If you lose property through casualty or theft, you may be entitled to a tax deduction. A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual in nature. Some examples of casualties include car accidents, fires, and vandalism. If your property is covered by insurance, you cannot deduct a loss unless you file a timely insurance claim for reimbursement. To claim a casualty or theft loss, you must complete Form 4684, Casualties and Thefts, and attach it to your return. A nonbusiness casualty or theft loss may be claimed only if you itemize deductions on Form 1040, SCHEDULE A. If your loss took place in a declared disaster area, please refer to Tax Topic 515, Disaster Area Losses (Including Flood Losses). For additional information, refer to Form 4684, or Tax Topic 507, Casualty Losses, or Publication 547, Casualties, Disasters, and Thefts (Business and Non-business). If many items are involved, also refer to Publication 584, Non-business Disaster, Casualty, and Theft Workbook.
References:
- Publication 547, Casualties, Disasters, and Thefts (Business and Non-business)
- Publication 584, Non-business Disaster, Casualty, and Theft Workbook
- Form 1040, SCHEDULE A, Itemized Deductions
- Form 4684, Casualties and Thefts
- Tax Topic 507, Casualty Losses
- Tax Topic 515, Disaster Area Losses (Including Flood Losses)
Is personal credit card interest tax deductible?
No, personal credit card interest is not tax deductible.
References:
Is the mortgage interest and property tax on a second residence deductible?
Real estate taxes paid on your primary and second residence are usually deductible. Deductible real estate taxes include any state, local, or foreign taxes on real property levied for the general public welfare. Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property.
References:
I bought a 5th wheel for vacationing. Can I deduct the interest on the loan for this 5th wheel? Where would it be listed?
If the loan is secured by the fifth wheel you can claim interest on this loan only if the fifth wheel meets the requirements of a qualified home and is considered your second home. A qualified home includes a house, condominium, cooperative, mobile home, boat or similar property that has sleeping, cooking and toilet facilities. You can only have one principal residence and only one qualified second home. The interest is deducted on Form 1040, SCHEDULE A, Itemized Deductions, as mortgage interest on line 10 or 11.
References:
What are the rules for mortgage interest on a manufactured Home? Can I deduct the interest on the mortgage for the manufactured home if it is on a rented lot? Can I deduct the interest for the manufactured home and for the lot if I buy a lot for the home?
For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, boat, or similar property that has sleeping, cooking, and toilet facilities.
If you buy a lot and place the manufactured home on it, the interest paid for the lot would be qualifying home mortgage interest, provided that it was secured by the house.
References:
I refinanced my home and paid closing costs. Are the loan origination fee, appraisal fee, document prep fee, closing fee, and title insurance or any of the other expenses deductible? Are any of the fees I paid to the bank for the loan deductible?
The loan origination fee (points) may be deductible. The term "points" is used to describe certain charges paid by a borrower to obtain a home mortgage. Points may be deductible as home mortgage interest.
References:
I refinanced my home mortgage and had to pay $2,000.00 worth of points to get the mortgage. Can I claim these points as a deduction on my tax return?
Points may be deductible as home mortgage interest. Normally, the points have to be amortized over the life of the loan. Points charged for specific services, such as preparation costs for a mortgage note, appraisal fees or notary fees are not interest and cannot be deducted.
References:
If the IRS says I must deduct points over the life of my mortgage, and I have a 30 year mortgage, does this mean that I divide the points paid by 30 and enter that amount on Schedule A?
You need to divide the points by the number of payments and deduct points for a year according to the number of payments made in the year. Points not included in Form 1098 should be entered on Line 12 of Form 1040, SCHEDULE A, Itemized Deductions.
References:
I refinanced my house once and paid $1,230 in points. On Schedule A, line 12 (points not reported on Form 1098) I have listed $41 each year. I refinanced my home again and paid off the entire previous loan including the points. Am I entitled to include the $984 (remaining points paid off) on Schedule A this year?
If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event.
Under the conditions you describe in your question, you would be able to deduct $984, in the year the mortgage ended. You would report the deduction on Form 1040, SCHEDULE A, Itemized Deductions.
References:
I took out a second mortgage and received a form with my mortgage interest on it but it has no points. Under the points section it states to check with your original lender. Can I still claim those points? If so, how do I get a form stating them?
Yes, you can still claim the points that were paid to the original lender (provided that it meets the limitations for points). Lenders are required to issue Mortgage Interest Statement's if you paid $600 or more of mortgage interest (including certain points) during the year on any one mortgage. You generally will receive a Form 1098, Mortgage Interest Statement, or a similar statement from the mortgage holder.
You should receive the statement for each year by January 31 of the following year. A copy of this form will also be sent to the IRS. If you have not received the Form 1098 from the original lender, you should try to contact them for a copy of the form.
References:
Tax Topics & FAQs | 2000 Tax Year Archives | Tax Help Archives | Home
