REAL ESTATE PROPERTY
Cost Basis of Assets/Property – Gains and Losses
Rather than the purchase price of an asset (like property, stocks/bonds, etc.), its “cost basis” is used to determine your capital gain or loss for tax filing purposes. This includes the sales tax you paid on the purchase, as well as any legal fees, brokerage fees or commissions, recording/accounting fees, any installation and testing fees, transfer and sales fees, and freight charges accrued, for example. It’s important to keep careful records of all these various charges so that you can accurately determine if you have a capital gain or loss when the asset is sold.
First Time Homebuyers – Tax Credit
If you were first-time homebuyer in 2008 and qualified for the special First-Time Homebuyer credit, you are required to repay 1/15th of the credit each year, beginning with 2010 and ending in 2025. If so, you must include a completed Form 5405 (First-Time Homebuyer Credit and Repayment of the Credit) with your federal tax return for the year when the you stopped living primarily in the home.
Legal Fees for Unlawful Discrimination
You may be qualified to have your income adjusted if you paid any attorney fees and court costs for settlements involving a claim of unlawful discrimination, a claim against the U.S. government under the IRS’s section 62(e), or a claim under section 1862(b)(3)(A) of the Social Security Act. If applicable, one must include these fees on form 1040.
Itemized Deductions – Mortgage Insurance Premium Deduction
Mortgage insurance premiums paid over the year can be claimed as deductible interest as long as they started before January 1, 2017 and make up less than $1 million of acquisition indebtedness. However, this deduction decreases for taxpayers with an adjusted gross income which exceeds $100,000. These qualifying premiums should be included on Schedule A, Itemized Deductions.
Past Tax Returns – Getting Copies
In the event that your mortgage banker requests to see your previous tax returns, you can request these copies from Quality Tax Services if you’ve previously filed them with us. If not, you can visit IRS.gov and request a transcript of your previous returns for free. If the financial institution requires an official copy of the tax returns, you can file Form 4506 (Request for Copy of Tax Return) with the IRS, but you will be charged a fee and it can take up to 60 calendar days to receive.
Real Estate – Closing Papers
It’s very important to keep careful track of any closing papers (including the HUD-1) on a house you’ve purchased. The HUD-1 will help you determine the points and other closing costs which you are qualified to claim as deductions on your tax returns.
Real Estate – Home Purchasers
You may be eligible to itemize your home purchasing costs as deductions, including mortgage interest, real estate taxes, and most points paid by you or the seller (in the year of the sale). One benefit of purchasing your home earlier in the year is higher mortgage payment deductions you may be qualified to claim on your tax returns.