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Posted: 2/4/2006 12:32:44 PM EDT
Link Posted: 2/4/2006 12:35:33 PM EDT
Points and interest in your payments.
Link Posted: 2/4/2006 12:39:03 PM EDT
FROM TURBO TAX
TURBO TAX
Tax Aspects of Home Ownership - Purchasing a Home
Home-related tax deductions include mortgage interest, real-estate taxes, home improvements, and more. Are you taking advantage of all of them?

As soon as you buy a home, you get some tax advantages. You can deduct home mortgage interest, real-estate taxes, and loan points as long as you maintain good records and file Schedule A to claim your home-related deductions. TurboTax guides you step-by-step through the deductions process. Find the TurboTax product that's right for you.

Mortgage interest
Points
Real-estate taxes
Home improvements
Home expenses that you can't deduct


Mortgage Interest
For most people, the best home deduction is for mortgage interest. How do you figure out how much you've paid in mortgage interest during the year?

You should receive a statement from your lender by the end of January listing the mortgage interest you paid during the year. This statement will be labeled Form 1098. It may be attached to, or part of, your monthly mortgage statement, so be sure that you study your January statement carefully to identify any portion labeled as Form 1098. The amount shown as interest paid on Form 1098 is the amount you deduct on your tax return.

Often a fraction of home mortgage interest appears on your settlement statement in the year of your purchase. This interest should be included in the Form 1098 statement provided by your lender.



Where Do I Take This Deduction?
Fill out Schedule A, Itemized Deductions, to take a deduction for your mortgage interest.

If you received Form 1098 reporting the amount of mortgage interest you paid for the year, record your interest deduction on Line 10.
If you didn't receive Form 1098, use Line 11 instead.
If your home loan is with a private party (for example, with the person from whom you bought your home), you may not receive a statement of interest paid even though your mortgage holder should have completed the form for you. You may still deduct your interest as long as your loan is secured by your home. Report your lender's name, address, and social security number on the lines next to Line 11. (You should have been given this information during the closing of your home purchase).



What About Late Charges?
You can deduct a late payment charge as home mortgage interest as long as the charge was not for a specific service you received in connection with your mortgage loan.



What About a Prepayment Penalty?
If you pay off your home mortgage early and you're required to pay a prepayment penalty, you may deduct that penalty as home mortgage interest as long as the charge was not for a specific service you received in connection with your mortgage loan.

For more information on mortgage interest, see IRS Publication 936, Home Mortgage Interest Deduction.



Points
When you buy a house, you often have to pay points to the lender in order to get your mortgage. These points can usually be deducted as a prepayment of interest. Other terms for points are:

Loan origination fees
Maximum loan charges
Loan discount
Discount points
You may deduct any points you pay, or points your seller paid on your behalf, in the year in which you pay the points, if you meet all of these requirements:

Your loan is secured by your main home (the one you live in most of the time).
Paying points is usual for your area.
The amount of the points isn't out of line for your area.
You use the cash method of accounting for expenses (you probably do). Using the cash method means you report income in the year you receive it and deduct expenses in the year you pay the points.
The loan was used to buy, improve, or build your home.
The points are computed as a percentage of the loan principal.
The points are clearly delineated on your settlement statement.
You put cash into your home purchase in an amount at least equal to the points you were charged.
Some points do not meet these criteria. They may still be deductible, but you have to deduct them over the life of the loan.

Points paid for refinancing generally can only be deducted over the life of the new mortgage.
Points you pay on loans secured by your second home can be deducted only over the life of the loan.
Points charged for specific services, such as preparation costs for a mortgage note, appraisal fees, or notary fees are not interest and cannot be deducted.

For more details on deducting points, see IRS Topic 504, Home Mortgage Points.



Real-estate Taxes
You can deduct annual taxes based on the assessed value of your property.



Where Do I Find How Much I've Paid in Property Taxes?
Your mortgage interest statement may list the amount of real-estate taxes you paid if you use an impound account with your lender to cover real-estate taxes and homeowner's insurance.
If your real-estate taxes aren't included in impound payments made with your mortgage payments, go through your cancelled checks to figure out how much you have paid for real-estate taxes during the year.
Be sure to pick up any real-estate taxes included on your settlement or closing statement as well.
Caution: Don't deduct your full payments into your impound account as real-estate taxes. Your impound account deposits are simply money put aside to cover tax and insurance payments. You should deduct only the actual real-estate tax payments made from the impound account by your lender.



Where Do I Take the Deduction?
Deduct your real-estate taxes on Schedule A.



What Can't I Deduct as Property Taxes?
You can't deduct charges for services to a specific property or for specific people even if the payments are made to the taxing authority in your area. Examples include:

A unit fee for the delivery of a service (such as water delivery).
A charge for a residential service such as trash collection.
A flat charge paid for a single service provided to you specifically by your local government.
Amounts you pay for local benefits that tend to increase the value of your property, such as the construction of streets, sidewalks, or water and sewer systems. But you can deduct whatever you pay for assessments for repairs or maintenance.
For more information on deducting property taxes, see the IRS FAQ on Property Taxes.



Home Improvements
Save receipts and records for all improvements you make to your home, such as landscaping, storm windows, and fencing. You can't deduct these expenses now, but when you sell your home the cost of the improvements is added to the purchase price of your home to determine the cost basis in your home. This serves to reduce any potential taxable gain that you may have from the sale of your home. For more information, see How Home Improvements Affect Your Taxes.



Home Expenses That You Can't Deduct
A lot of the costs of home ownership are not deductible. Don't get caught trying to claim any of the following expenses as a deduction:

Homeowner's insurance premiums
Fire insurance premiums
FHA mortgage-insurance premiums
Principal payments made on your mortgage
Title or mortgage insurance
Utilities, such as gas, electricity, water, or trash collection
Most settlement costs on your closing or settlement statement
Homeowner's association dues and fees
Link Posted: 2/4/2006 12:42:40 PM EDT
Link Posted: 2/4/2006 1:31:20 PM EDT
Like SLF said.....Just use TurboTax (TT)...

I talked to a CPA the other day....asked what they charge to do taxes...would be in the ballpark of 200-300 bucks for me. I asked about TTand she tacitly nodded, and basically said, if you have a decent idea of what you are doing, TT will get you about the same dollar value as a CPA can...

Now if you are a fat corporate mogul with offshore accounts, couple investment homes, large sums of $$ in the bank, lots of assets, a CPA would be good, otherwise, throw out the paper and use TT.

Worth the 30 bucks for the proggy.

Link Posted: 2/4/2006 1:54:47 PM EDT
I am not slamming turbo tax but I checked them out last year and I can do my own in about 1/4th time it took to plug all this shit into TT, answer all of their questions, etc. I file long form, have capital gains, itemized deductions, tuition deductions etc.

I have used accountants twice, both of whom screwed things up, and once had to do an amended return as a result, looked over TT and wasn't impressed to be honest. Get the damn book out and go over it, after the first time it gets waaayyy easier.

I did mine, as above, Fed and State in about an hour. My state form is a royal PITA.

Make sure you check to see if you fall under the Alternative Minimum Tax.
Link Posted: 2/4/2006 2:07:38 PM EDT
[Last Edit: 2/4/2006 2:09:26 PM EDT by nightstalker]
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Link Posted: 2/4/2006 2:17:31 PM EDT
fileyourtaxes.com
This will be my fourth year with them.
Works very well.
Also, you can go completely through it before paying, so it is worth a look, if you need a good way to file.
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