Tax Considerations
Are seller-paid points deductible?

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 real estate buyer.

Can I deduct the loss I suffered when I sold my home?

Currently, the IRS does not allow deductions for losses on the sale of your own home. Unfortunately a loss on the sale of your real estate property cannot be used to your advantage for tax purposes.

What are the rules on capital gains when inheriting a house?

When children inherit a home, the IRS determines their basis in the property on the date of the owner's death. The cost basis is not the amount the owner originally paid for the house, but the property's fair-market value on the date of the parent's death.

Cost basis is a tax term for the value assigned to a real estate property at the time it is acquired, for the purpose of determining gain or loss when it is sold. For example, one of the three siblings sold his or her share of a property to be divided equally, he or she must pay capital gains tax for whatever profit made over one-third of the new basis.

In New York State, If a real estate property is valued at over $1,000,000, it is subject to estate taxes. 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. For more information, consult the IRS'sPublication 950, "Introduction to Estate and Gift Taxes." Order by calling (800) TAX-FORM ordownload from irs.gov.

What home-buying costs are deductible?

Any points you or the property seller pay to purchase your home loan are deductible for that year. Real estate property taxes and interest are deductible every year. Often, the maintenance costs and common charges associated with owning a co-op or condo are partially tax-deductable.

Other home-buying costs (closing costs in particular) are not immediately tax-deductible, but 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. Points paid when you refinance an existing mortgage must be deducted ratably over the life of the new loan.

Where do I get information on IRS publications?

The Internal Revenue Service publishes a number of real estate publications. These are available for free online or by calling (800) TAX-FORM.

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"

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