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Frequently Asked Tax Questions And Answers
Keyword: Property Taxes
3.6 Itemized Deductions/Standard Deductions: 6. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses)
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, Tax
Information for First Time-Homeowners, and Publication 936, 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, Home
Mortgage Interest Deduction; Publication 17, 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, Home Mortgage Interest Deduction; Publication 17, Your
Federal Income Tax for Individuals; Publication 530, 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 v 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, 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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