Friday, December 8, 2006

HOME RELATED EXPENSES may help your tax

The big deductions are, of course, the property taxes and mortgage interest. Often, without these, you are better off taking the standard deduction. If paid from escrow, the actual payment--not the escrow payment itself, is deductible
ALL real estate taxes are deductible if you OWN the property--even on vacant lots or vacation homes. The taxes must be based on VALUE; i.e. Ad Valorem taxes.
PROPERTY OWNER ASSOCIATION DUES are not deductible (unless it is on a Rent house you own)
Mortgage interest on your home is deductible subject to reduction if the acquisition debt is more than $ 1 million. Also there are limits on the deduction for interest on a second home.
You may get additional home-related deductions if you qualify to deduct a home office. I work at home in and office in my home, so I deduct part of the interest and taxes as a business expense (which cuts my self-employment tax).
I can also deduct a portion of my UTILITY BILLS, DSL service and depreciation on my home.
The depreciation I take would be 'recaptured' if I sold the home, but it at least defers the tax.
Also, if I don't take the depreciation deduction, it would still be recaptured since the IRS considers it whether it was Allowed or Allowable.