Frequently Asked Tax Questions
Itemized Deductions/Standard Deductions - Real Estate (Taxes,
Mortgage Interest, Points, Other Property Expenses)
Rev. date: 2/4/2010Unless you have begun construction of a home on the bare land
that you can occupy within 24 months the interest you paid on the second
mortgage would not qualify as deductible mortgage interest.
Rev. date: 2/15/2011You may deduct home equity debt interest, as an itemized deduction,
if all the following conditions apply:
• You are legally liable to pay the interest
• You pay the interest in the tax year
• The debt is secured with your home
• The total amount of the home equity
indebtedness does not exceed the fair market value of the home (at the time the
debt was incurred) and does not exceed $100,000.
Rev. date: 1/1/2011A loan taken out for reasons other than to buy, build, or substantially
improve your home, such as to pay off personal debts may qualify as home equity
debt.
Rev. date: 1/1/2011Casualty losses not compensated for by insurance or otherwise
are generally deductible only in the year the casualty occurred. Consider the
following:
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If you have a deductible loss from a disaster in an area that
is officially designated by the President of the United States as eligible for
federal disaster assistance, you can choose to deduct that loss on your return
for the year immediately preceding the loss year.
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You may treat the loss as having occurred in either the current
year or the previous year, whichever provides the best tax results for you.
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If you have already filed your return for the preceding year,
the loss may be claimed by filing an amended return,
Form 1040X (PDF),
Amended U.S. Individual Income Tax Return.
For more information on disaster area losses (including flood
losses), refer to:
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Publication 584,
Casualty, Disaster, and Theft Loss Workbook, can be used to help you catalog your property
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Rev. date: 1/1/2011The mortgage interest on a second home which you use as a residence
for some portion of the taxable year is generally deductible if the interest
satisfies the same requirements for deductibility as interest on a primary
residence.
• Real estate taxes paid on your primary and
second residence are, generally, deductible. The limitation for mortgage
interest on your primary and secondary residence is $1,000,000 for acquisition
indebtedness and $100,000 for home equity indebtedness.
• Deductible real estate taxes include any state,
local, or foreign taxes based on the value of the real property levied for
the general public welfare.
• Deductible real estate taxes do not include
taxes charged for local benefits and improvements that increase the value of the
property, such as assessments for sidewalks, water mains, sewer lines, parking
lots, and similar improvements.
Rev. date: 1/1/2011No, you don't divide the points by 30. If you choose to use
the straight-line method, you need to divide the points by the number of
payments over the term of the loan and deduct points for a year according to the
number of payments made in the year.
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If the loan ends prematurely, due to payoff or refinance with
a different lender, for example, then the remaining points are deducted in that
year.
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Points not included in
Form 1098 (PDF) (usually not included on a refinance) should be entered
on
Form 1040 Schedule A (PDF),
Itemized Deductions.
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