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FLORIDA
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METRO (DC-MD-VA-NY) |
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Access the HOME BUYERS RESOURCE DIRECTORY -- Click here |
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HOUSING:
02 APR 2007 |
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Tax Time: Which Real Estate-Related Deductions Are You Entitled To? |
By Charles J. Kovaleski
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Just like last year, taxpayers get
an extra couple of days to file their returns this year: April 15
falls on a Sunday, but since April 16 is a holiday (Emancipation
Day, which is observed in Washington, D.C.), the IRS has pushed the
deadline to Tuesday, April 17, for the entire country. |
At tax time, most homeowners are keenly aware of the big daddy of
tax deductions: The interest accrued on monthly mortgage payments,
which can amount to thousands of dollars. If you decided to pay your
mortgage off early in 2006, as many did, you can also deduct the
prepayment penalty fees from your taxes.
Other deductions available to homeowners are less well known. If you
use an accountant, he or she will be well-versed on the deductions
for which you qualify, as will your real estate attorney, so be sure
to consult with either before April 17.
But if you’re like millions of Americans who file their own taxes,
take special note of the following real estate deductions (many of
which are overlooked each April:
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Fees or “points” paid to obtain a mortgage on your principal
residence.
Did you buy a home in 2006 and pay the mortgage lender a
loan fee, or “points?” Be sure to include this itemized interest
deduction on Schedule A. Each point represents 1 percent of the
amount borrowed, so if you paid two points, or $2,000 on your home
mortgage loan, deduct it. |
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Uninsured casualty loss or damage deduction. If your home sustained
damage because of a tornado, a hurricane or theft and you were not
compensated by insurance, you may be able to get a deduction on your
taxes. To qualify for this deduction, the total amount of the
un-reimbursed damage must be more than 10 percent of your adjusted
gross income—less $100 from the un-reimbursed damage.
Fees or points paid when you refinanced. Unlike those fees paid on
your mortgage, this deduction is valid over the life of the
mortgage, rather than in the year you refinanced.
Capital gains on the sale of a home. Single homeowners can take
advantage of a tax-exempt profit of up to $250,000 when they sell
their home, as long as the home was the seller’s primary residence
for two of the last five years. Married homeowners filing joint tax
returns get a break on capital gains taxes on up to $500,000 of the
profits from the sale of their home. If you sold rental or
investment property last year—or plan to sell this year—and want to
avoid capital gains tax, discuss tax-deferred exchanges with your
real estate attorney before selling. Known as a Section 1031
Exchange, the rule requires sellers to trade equally or up in both
price and equity for qualifying “like kind” properties within a
certain time limit.
Moving costs. If you moved due to a job change last year, your
moving costs may be deductible whether you are a renter or an owner.
The distance from your old home to your new job must be at least 50
miles farther than the distance from your old home to your old job
to qualify. You also must be employed at least 39 weeks during the
next 52 weeks in the vicinity of your new job location.
Pro-rated mortgage interest on assumable loans. You can deduct your
share of pro-rated monthly mortgage interest if you bought a home
and took over its existing mortgage payments from the prior owner.
Private mortgage insurance. Legislation passed earlier this year
allows some homebuyers to deduct the cost of private mortgage
insurance—for those buying homes this year only. That means, the
deduction is only available for 12 months for the 2007 tax year, so
be sure to make a mental note for next year’s taxes.
Finally, if you work full or part time from your home, you are also
entitled to significant tax deductions for part of your household
expenses.
The square footage of your work space determines your deductions. If
you own a 1,500-square-foot house, for instance, and your business
area is 500 square feet you can deduct 33 percent of your household
costs, including homeowners insurance, utilities, repairs, mortgage
interest and property taxes.
Additional home-business costs are fully deductible, including
business phone expenses and the cost of renovating or painting the
business area. Business insurance premiums are also fully
tax-deductible.
Check with your tax accountant or real estate attorney if you have
any questions about deductions relating to your home.
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CHARLES J. KOVALESKI is president of Attorneys’ Title Insurance
Fund, Inc. (The Fund), the leading title insurer in Florida and the
sixth largest title insurance company in the country. Acknowledged
as the Florida residential real estate expert, The Fund has been in
business for more than 50 years and supports a network of more than
6,000 attorney agents statewide who practice real estate law. The
Fund, based in Orlando, underwrites more than 300,000 title
insurance policies for owners and lenders in Florida every year. For
more information, visit www.fundhomeinfo.com.
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