GRI / Broker / President
14585 Big Basin Way, Saratoga, CA 95070
speaking, April 15th is tax day. But for Americans who expect a refund -
including many homeowners who want to cash in on real estate-related
tax perks - filing sooner holds the promise of getting that check in
If you count yourself in that number, here’s a handy guide for 9 pieces of paper you should be sure to round up as you prepare to file, in order to reap every penny of the tax rewards you’ve earned by virtue of owning a home.
- Mortgage Interest Statement - IRS Form 1098. The
meatiest real estate tax deduction on the books is the one that allows
you to deduct 100 percent of the mortgage interest you paid in a year -
including prepaid interest or points you might have paid at close of
escrow, if you bought a home last year. By now, you should have received
in the mail a Form 1098 from your mortgage lender that reports how much
that interest totaled up to in 2011. If you itemize your taxes and
claim a mortgage interest deduction, you must include this form with
your tax form when you file.
management services also post the form digitally in your secure account
on the web. Just login like you would to make your monthly payment, and
look for a notice that says you can now download your 2011 Form 1098.)
- Property Tax Statements. In addition to deducting your mortgage interest, if you own a home you are eligible to deduct the property taxes you pay to your local city, county and/or state. You are not allowed to deduct some of the other miscellaneous expenses that some localities bundle up with the taxes
they collect, like waste management and local assessments for things
like street lighting, libraries and sidewalk construction. To get this
deduction right, the best practice is to have your property tax
statements at hand and make sure you’re only deducting what’s allowed.
even have received a property tax statement yet - if that’s the case,
look to #3, below.
- Uniform Settlement Statement (HUD-1). If you bought or sold a home last year, right after closing you should have received a form called the HUD-1 Settlement Statement (hint: it’s usually on legal-sized paper and contains an accounting of credits and debits for you and your home’s buyer or seller). That form documents a number of line items which might help you out at tax time, including prepaid interest, the prorated property taxes you paid at closing, and
closing costs like original fees and discount points. Some states offer
tax credits for buying a foreclosure; check with your tax pro to find
out if any such credits apply to you. If so, this statement might be
your ticket to lower taxes.
gotten it on a disk - and you can always email your real estate or
escrow agent for a copy, as well.
- Moving Expense Receipts. Moving expenses are tax deductible, if your
move is closely related, both in time and in place, to the start of
work at a new or changed job location and you meet the IRS’ time and
distance tests. Long story short, your new home must be at least 50
miles farther from your new workplace than your old home was from your
prior place of work, and you must work essentially full-time.
So, if you bought or sold a home and moved in 2011, you’ll need to
include receipts from expenses you incurred making the move (meals not
included) in your tax prep paperwork.
- Cancellation of Debt Statement - IRS Form 1099. Homeowners
who lost a home to foreclosure, or divested of one by negotiating a
short sale or deed in lieu of foreclosure with their lender might
receive some version of Form 1099 from their lenders, charging them with
income in the amount of the mortgage debt that has been cancelled. You
see, if you borrow money from someone, then they cancel the debt, that
money you originally borrowed becomes income in the eyes of the IRS -
and income is, as you know, taxable.
- Utility statements for home office.
For the average everyday homeowner who works at their employer’s place
of business, utilities are not deductible (sorry!). But if there is a
part of your home that is “regularly and exclusively” used for business,
you might be able to claim that portion of your home as a home office,
and deduct some portion of your home utilities and costs of painting and
repairs, as a result.Talk with your tax provider about what expenses
are allowable to be claimed under your home office deduction, and
whether or not you should take it.
- Income and Expense statements from rental properties.
Some of you have elevated the art of home ownership to a business! If
you are a landlord, your tax situation is more complicated than that of
the average bear; you’ll need to have complete income and expense
statements when you put your tax returns together. It might actually
behoove you to consult with a tax professional to make sure you are
appropriately depreciating the property over time and not taking
deductions that will expose you to the risk of audits, as well as to
begin cultivating a long-term tax strategy for your real estate
- Contractor receipts from energy efficient home improvements.
Under the Nonbusiness Energy Tax Credit, homeowners who have made
improvements to their homes that fall within a list of energy efficient
upgrades might be eligible to claim tax credits. If, during 2011, you installed
energy efficient improvements such as insulation, new dual-paned
windows and furnaces, you might be eligible for a tax credit of 10
percent of the cost of these upgrades, up to $500 - only $200 of which
may be used to offset the cost of windows.
- Mortgage Credit Certificate (MCC).
If you own a home you bought in the last few years using a Mortgage
Credit Certificate issued by a local housing authority, that Certificate
may entitle you to a pretty hefty tax credit, based on a percentage of
the mortgage interest you paid - on top of your mortgage interest
deduction. MCCs apply as long as you live in the home and have a
mortgage on it, but they only apply to defray taxes you actually owe -
you can’t use them to get a refund. In any event, your mortgage credit
certificate, if you have one, is a must-have document as you start
putting your tax prep plan in play.
cannot hurt to get some professional help and advice to make sure you
maximize your deductions, while minimizing your exposure to audit. And
you should always consult with a tax attorney or certified public accountant regarding your tax liabilities and implications when you buy, sell, short sell or
lose a home to foreclosure.