[net.taxes] House purchase deductions

davidson@bunker.UUCP (_____) (01/25/84)

     Does anyone know, if you buy a house what are the deductibles?

     Sales Tax ?
     Attorney Fees ?
     Closing Fees ?
     Other Fees ?

     If you had a professional estimator in, is his bill deductible ?

                                            Thanks In advance .

johnson@saturn.UUCP (01/30/84)

At the risk of being the n-th person to answer this inquiry, here goes:

Generally, anything on your closing statement marked "interest" or "taxes"
is fully deductible in the year of purchase.  If you're buying the house
as your personal residence (that is, not for investment), you can also
deduct as interest anything marked "loan fees" or "mortgage points".  If some
of the attorney fees are for tax advice (and you have a receipt that says
so), then you can deduct that as a Miscellaneous Deduction on Schedule A.

That's it.  Everything else must be added to the tax basis for the property,
which has the net effect of reducing the amount of capital gains tax you
might have to pay someday, when you sell the house.
-- 
Mark Scott Johnson

mark@elsie.UUCP (01/30/84)

Re:
     Does anyone know, if you buy a house what are the deductibles?

     Sales Tax ?	Maybe. A straight sales tax, yes; but there are several
			local "sales" taxes the IRS won't let you take off.
			Montgomery County, MD. has some type of "transfer tax"
			(about 1% or so -- a real kick in the teeth) that
			the IRS disallows (I understand they make a LOT of $ in
			penilties from it).
     Attorney Fees ?	No.
     Closing Fees ?	No.
     Other Fees ?	No.

     If you had a professional estimator in, is his bill deductible ?	No.

NOTE: all the above do count toward the purchase price of your house and so
can be used to offset any gains you may make on it.
NOTE ALSO: I am not a tax professional. The above is my understanding of the
tax code as it applies in this case and I may be wrong; at least in some cases.
Do not cit this article if you get audited. You'll just get us both in trouble
(let's see; how do you cancel -- CTRL D?  :-))

-- 
UUCP:	decvax!harpo!seismo!rlgvax!cvl!elsie!mark
Phone:	(301) 496-5688

cmsj@ihuxm.UUCP (Chris Jachcinski) (01/31/84)

While on this subject, can anyone give me a definitive
answer to this question regarding mortgages?

In 1983 I refinanced my condo; of course there were the
"usual" points and I assume these are deductible as
interest (they do meet all the IRS criteria specified
in publication 17).  I also paid a "buydown" fee which
lowered the interest rate of the mortgage.  Is this
fee considered the same as "points" and fully deductible
as interest in 1983? or do I have to spread out the sum
over the life of the mortgage?  or some other rule?

                           Thanks,
                           Chris Jachcinski
                            AT&T Bell Labs, Naperville, Il
                            *!ihnp4!ihuxm!cmsj

halle1@houxz.UUCP (01/31/84)

Points for refinancing are NOT deductable in the year of payment.
They must be amortized over the life of the mortgage.  It is a
common misconception that refinancing and new purchase are the same
as far as tax laws are concerned.  The IRS has sais many times that
it is not so.  I have seen somewhere in an official IRS pub that
specifically points paid for refinancing are not deductable all at
once.  How to amortize them?  I don't know.  However, I suppose it
doesn't hurt to try to take it all at once.  You could claim
ignorance.  Besides you probably won't get caught.      Probably....

dak@hou5e.UUCP (01/31/84)

Not very many of the expenses in buying a house are deductable.
We deducted the points charged by the bank as interest. The other
expenses, (lawyers fees, survey, application fees, etc) are
considered an expense. When we sell the house, these may be
deducted from the sale price of the house for determining capital
gains. (Also, anything you spend to sell the house, eg, the real
estate fee, is also deductable from the price of the house).

This is information I've gotten from our tax accountant and friends,
so there may be ways to deduct more than I know about.

Debby Kirkman

eder@ssc-vax.UUCP (Dani Eder) (02/01/84)

31 January 1984

     I'm in the process of buying a house, and was wondering about
the same question.  Here's what I found out:

     Most expenses of buying a house are not deductable.  The major 
exception is interest.  Interest occurs in two forms.  One is if you
buy the house before the end of the month.  You then pay accumulated
interest on the mortgage for part of the month.  The other is if you
pay your lender "prepaid interest" in order to obtain better financing
often called "points" or "discount points".  If it is identified as
interest rather than a fee type payment, it is deductable.

     Some of the additional costs can be added to the "basis", or cost
of the house.  If you keep reciepts for these costs, and any other
improvements you make to the house over the years, it will reduce the
"gain", which is the difference between selling price and "basis".
The gain is taxed.  See a tax guide for details.  I reccommend Lassers,
which is the most detailed.

                                                   Dani Eder
                                                   Boeing Aerospace Company

sdl@rayssd.UUCP (02/05/84)

Not quite.  Attorney fees and related stuff CAN be deducted from
your taxes if you have bought the house in order to move to take up a new
job, in which case these things are deductible as moving expenses
(up to the usual $3000 limit on indirect moving expenses).