![]() Talk to your CPA about any issues you’re facing related to taxes on a home sale. If you don’t meet those requirements, you may still qualify for a partial exclusion of gain if you experience any of a variety of unforeseen circumstances, including death, divorce, job loss or employment changes that render you unable to pay basic living expenses for the household, home damage or condemnation, or a pregnancy with multiple births. (There are special exemptions that may apply to those in the military who are on “qualified official extended duty.”) If you sell your home for more than your adjusted basis in the property, you generally qualify to exclude up to $250,000 of that gain from your income ($500,000 for a married couple filing jointly) if you’ve owned and used the home as your main home for at least two of the last five years prior to its date of sale. Homeowners’ association fees paid on your personal residence are not deductible, but if you have a home office you may be able to deduct a portion of those HOA fees as an expense related to that office.įact: You Should Know the Tax Rules on the Sale of a Home New homeownership typically means paying real estate taxes, but the good news is that you can generally deduct those taxes, which will reduce their impact on your bottom line. Turn to your CPA with any questions about your eligibility for the mortgage interest deduction or about what it can mean for your finances. In many cases, if you use your loan to buy or build your main home and the points paid were not more than the points generally charged in your area, you can fully deduct the points in the year you paid them. You can also deduct the cost of points you pay for a mortgage. Interest on home equity debt of up to $100,000 ($50,000 for a married couple filing separately) is deductible, as well. An individual or married couple filing jointly is generally eligible to deduct all interest payments on home acquisition debt up to $1 million (up to $500,000 for a married couple filing separately).īecause of the way mortgages are designed, your initial payments are made up mostly of interest, so the deduction is at its highest in the early years of your loan, which is a nice break for new homeowners. Your monthly mortgage bill will include both principal and interest payments. Fact: There’s a Mortgage Interest Deduction The California Society of CPAs () provides a rundown of tax facts you need to know. Whether you’re still shopping or have already set up housekeeping, it’s a good idea to be aware of some of the tax implications of ownership. Caution – Since this interest is not reported on a Form 1098 it will create a mismatch on the IRS computer and should be reported on line 11 – “Home mortgage interest not reported to you on Form 1098”.Īdditions to Basis - If the HOA assesses the owners for an improvement (for example adding a swimming pool), the amount each HOA member pays of that cost can be added to the basis of their home.Are you planning to buy a home sometime soon?Ī total of 63.7 percent of American families own their primary residence, according to United States Census Bureau statistics, and home ownership is a long-standing part of the American Dream. Interest (Schedule A) – Although very rare and probably involving a minimal dollar amount, where the HOA fee is itemized and a portion of the fee includes interest secured by the association’s real property, the interest may qualify for the home mortgage interest. Taxes (Schedule A) – Where the HOA fee is itemized and a portion of the fee includes common area real estate taxes, the tax portion can be deducted as real property taxes on Schedule A. Office In Home – Where the owner resides in the home and a portion of the home qualifies for the business use of the home, and provided the simplified deduction method for computing the office-in-home deduction is NOT used, a prorated portion of the HOA dues can be used in the home office deduction computation. Where the rental is a vacation home rental, the appropriate proration is required. Rental – Where the residence is being used as a rental, the homeowner dues are deductible on Schedule E. ![]() There are circumstances where HOA dues may be wholly or partially deductible or even add to the residence’s basis, as explained below. Whether any part of HOA dues can be a deductible expense depends on how the residence is being used. In general, there is no Schedule A deduction for homeowner association (HOA) dues.
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