Are fees and assessments owed a homeowner’s association deductible?
buy cipro in uk Generally not because they are considered personal living expenses. But if an association has a special assessment to make capital improvements, condo owners may be able to add the expense to their cost basis when the property is sold. Another exception may apply if you rent your condo – the monthly condo fee is deductible every year as a rental expense.
Are there tax credits for first-time homebuyers?
Yes, thanks to the many city and county governments that offer Mortgage Credit Certificate (MCC) programs, which allow first-time homebuyers to take advantage of a special federal income tax write-off. The credit reduces the amount of federal taxes paid by the buyer each year, if he keeps the same loan and lives in the same house.
An MCC also makes it easier for eligible buyers to qualify for a mortgage loan. The lender can reduce the housing expense ratio – the percentage of gross monthly income applied toward housing expenses – by the amount of the tax savings. Normally, lenders reject loans if the housing expense ratio is too high.
Program requirements for MCCs vary, although most adhere to the following guidelines:
The buyer must live in the home being purchased with an MCC-assisted mortgage.
Total household income cannot exceed certain limits.
The buyer cannot have owned a principal residence within the past three years. This restriction may be waived if a property is purchased within a certain targeted area.
The purchase price must fall within an established limit.
More information is available by calling your local housing or redevelopment agency, or contacting us.
Are up-front fees and closing costs deductible?
Many of the costs paid at closing are not immediately deductible.
The exception is points you pay to purchase your home loan. They are deductible for that year. Points paid when you refinance an existing mortgage must be deducted over the life of the new loan.
Some fees – including loan application, appraisal, document preparation and recording fees – that are assessed when purchasing a home can be recouped by adding them to the adjusted cost basis, the starting point for figuring a gain or loss when selling the home.
Significant home improvements also can be calculated into your cost basis.
How can owning a home pay off at tax time?
A home provides many tax benefits, literally from the time you buy to the time you sell. The mortgage interest paid on a home loan up to $1 million for a primary residence or second home is tax deductible every year, as is the local property tax. Other mortgage costs – including late-payment charges and early-payment penalties – are also deductible.
And if you use a portion of your home for business purposes, you can take a depreciation deduction as well.
Many federal tax benefits are also available from local and state tax agencies. Contact your local tax agency for more information.