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Real Estate

Real Estate Property

Basis of Property - Gains and Losses

When you purchase property, the basis is usually its cost. Your cost also includes amounts you pay for sales tax paid on the purchase, commissions, and freight charges. Keep accurate records of all items that affect the basis of the property. This will help you to determine if you have a gain or loss when the item is sold.

 

First Time Homebuyers - Tax Credit

If you qualified for a First-Time Homebuyer credit in 2008, you must repay 1/15th of the credit each year beginning with 2010 and ending 2025.

 

Legal Fees for Unlawful Discrimination

You may be entitled to an adjustment to income for any attorney fees and court costs for settlements involving a claim of unlawful discrimination, a claim against the U.S. government, or a claim made under section.

 

Itemized Deductions - Mortgage Insurance Premium Deduction

Mortgage insurance premiums will be allowed as deductible interest on Schedule A, Itemized Deductions. Premiums for mortgage insurance polices started before January 1, 2017, for less than $1 million of acquisition indebtedness are deductible on Schedule A as mortgage interest. This deduction begins to phase-out for taxpayers with adjusted gross income exceeding $109,000. (or $54,500 for married couples filing separately)

 

Past Tax Returns - Getting Copies

If you are buying a home, your mortgage banker may ask for copies of several prior years' tax returns. If you cannot locate them, contact The Mobile Tax Man office to request free copies of returns. Otherwise, you can go online to IRS.gov and request a transcript of your return for free. If the financial institution requires a copy of the return, file Form 4506, Request for Copy of Tax Return, with the IRS. For a fee, the IRS will mail you copies of your past returns. This can take up to 60 calendar days.

 

Real Estate - Closing Papers

Once you close on your new home, keep your closing papers, including the Form HUD-1, in a safe place. When it is time for tax preparation, use Form HUD-1 to help determine the points and other closing costs you can deduct on your tax return.

 

Real Estate - Home Purchasers

Your home purchase can be a wonderful tax advantage. You may be able to benefit from itemizing your deductions. If itemizing, you can deduct payments such as mortgage interest, real estate taxes, and most points paid by you or the seller in the year of purchase. The earlier in the year you purchase your home, the more months of mortgage interest you will have by tax time.

Real Estate Property

Selling your House

Publication 523, Selling Your Home

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Additional Itemized Deductions

Since most people can itemize once they have a mortgage, this also means you may now be able to deduct a wide range of other expenses, including cash and noncash donations to charities, state and local income taxes, personal property taxes, unreimbursed employee business expenses and other miscellaneous deductions. See Publication 529 for more information at www.irs.gov

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Itemized Deductions for the Home Owner

The following items may be deductible as an itemized deduction for home owners: Real Estate Taxes, Home Mortgage Interest, Points paid to secure a mortgage loan, and Mortgage Insurance Premiums. For more information on Tax Information for Homeowners See Publication 530 at www.irs.gov

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Itemized Deductions vs. Standard Deductions

  • Your home purchase can be a wonderful tax advantage. You may be able to benefit from itemizing your deductions instead of taking the standard deduction. The standard deduction for most people in 2019 is as follows:

  • $12,200 - Single

  • $24,400- Married Filing Joint

  • $12,600 - Qualified Widow

  • $12,200- Married Filing Separate

  • $18,350- Head of Household

Selling your House

Foreclosure

Home Foreclosed or Abandoned

If your home was foreclosed or you had a short sale, you must report this on your tax return. The amount of debt forgiven by the loan holder is considered income. For tax years prior to 2017, forgiven debt due to a foreclosure or short-sale of your main home is exempt from taxes. You must file a tax return and attach Form 982 if you qualify for the exemption. Your lender should send you Form 1099-C when you foreclose on your home, this form will have the information you need to complete your tax return. For more information, see IRS Publication 4681at IRS.gov.

Foreclosure

Refinanced Mortgage

Publication 936, Home Mortgage Interest Deduction

When interest rates drop, many people rush to refinance their home mortgages. Homeowners often assume that they may also deduct their points. Generally, only the points paid on the portion of the loan used to improve your home is deductible in the year you purchase a new loan. The remainder must be deducted over the life of the loan.

Refinanced Mortgage

Sold Home

Exclusion - Sale of Home

You can avoid paying taxes on the first $250,000 of profits on the sale of a home if you are single, or the first $500,000 if you are married. Generally, you must own and live in the home two of the last five years. If you did not own and live in the home two of the last five years, you still may be able to use a prorated exclusion amount in certain situations (for example, if you move because of your job). The excludable amount is modified when a portion of the home is used for business purposes. If you are getting ready to sell your home, it is time to calculate the basis of your property for tax purposes. If you have saved your Form HUD-1 from closing, you can add the attorney's fees, surveys, agent's commissions, title searches, recording fees, and the transfer and stamp taxes to the basis. You may also add the cost of improvements you have made to the property.

Sold Home

Rental Property

Publication 527, Residential Rental Property (Including Rental of Vacation Homes)

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If you own rental real estate, you should know how it impacts your personal tax return. Rental income must be reported on your tax return, and generally, associated expenses can be deducted from your rental income. Reviewing answers to the following common questions regarding rental property may help you understand the tax implications of rental property ownership:

  • What is considered rental income?

  • What deductions can I take as an owner of rental property?

  • What are some things I should know about rental property?

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Contact The Mobile Tax Man office for more information or assistance. 214-317-9927

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What is considered rental income?

Rental income is any income you receive for the use or occupancy of property you own. Some examples are:

  • Rent

  • Payment to cancel a lease

  • Advance rent

  • Expenses paid by the tenant

  • Any security deposit kept because a tenant did not fulfill their part of the rental agreement

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Rental income does not include:

  • A security deposit you are holding with the intent of returning it to the tenant at the end of the lease

  • Income received from renting your home for fewer than 15 days per year

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What deductions can I take as an owner of rental property?

Deductible expenses for rental property are the ordinary and necessary expenses to manage, conserve, and maintain your property. Deductible expenses include:

  • Advertising in the newspaper for tenants and cost of signs

  • Cleaning supplies

  • Real estate taxes

  • Mortgage and other interest paid for the rental property

  • Cost of insurance-hazard, flood, fire, or liability

  • Payments for service such as lawn care, pest control, and trash collection

  • Payments for maintenance of the property

  • Professional fees for tax advice and tax return preparation fees for the part of the tax return dealing with rental property

  • Cost of new locks and keys

  • Commissions paid for finding tenants

  • Cost of necessary transportation to and from the rental property for the purpose of maintenance, management, rent collection, picking up supplies, or checking the property (if you use your personal vehicle, either keep track of actual expenses and miles traveled or just the miles traveled)

  • Cost of repairs and maintenance (not improvements) to keep your property in good condition (this includes items such as repainting and fixing floors and windows)

  • Cost of renting equipment used for the rental property

  • Depreciation of the property (not including the land)

  • Depreciation of appliances, furnishings, and improvements

  • Any long distance calls associated with your rental property

  • The court costs for evicting a tenant

  • Legal fees pertaining to the rental property or tenants

  • Utilities

  • Expenses incurred when the property is not rented as long as you are actively trying to rent the property (even if you are renting it for the first time)

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You cannot deduct:

  • Rental income lost due to vacancy

  • The cost of improvements which increase the value and/or extend the life of the property or modify it for a new use (includes such things as a room addition, new carpet, new appliances, fencing, or a new roof - these items can generally be depreciated)

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What are some things I should know about rental property?

If you rent only part of your property, certain expenses must be divided between the part used as rental property and the part used for personal purposes.

If you do not rent your property for profit, you can deduct your rental expenses only up to the amount of your rental income.

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When rental property is sold, the resulting gain or loss is treated as ordinary or capital, depending on the circumstances.

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The rental of personal property such as equipment or vehicles is reported as business income. You are in the business of renting personal property if the primary purpose for renting the property is income or profit and you are involved in the activity on a continuous and regular basis. If your rental of personal property is not a business, other rules for reporting will apply.

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Deductible losses from residential rental properties are subject to certain limitations. If you are considered a real estate professional, special rules apply for the reporting of income and losses. For more information, contact The Mobile Tax Man office for assistance. 214-317-9927

Rental Property
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