I trust that you had a Merry Christmas and a Happy New Year. Unfortunately, Uncle Sam doesn't let us enjoy our celebration too long before reminding us that tax time is just around the corner. Anyway, life goes on, But for the home owner, life can be sweeter as you cash in on some of the following tax benefits:
1. Loan origination fee -- these are deductions for the buyer (but not the seller) even if paid by the seller!.
2. Loan discount points (if any) - again, these are deductions for the buyer (but not the seller) even if paid by the seller.
3. Pre-paid interest (purchase) or pro-rated interest (sale).
4. Property tax prorates (buyers and sellers)
5. Mortgage interest paid in 2008.
6. Second mortgage interest paid in 2008.
7. Moving expenses (including storage, mileage, moving services, truck/trailer rental, hotels) if your move was more than 50 miles. Use IRS Form 3903 to claim these deductions.
Let me also say a word about seller capital gain taxes. Very simply, you probably don't have to concern yourself with this. If you have lived in the home for two out of the past five years and unless the net gain on the sale of that home was over $250,000 for single persons or $500,000 for married couples, you have no capital gain tax liability. Well that pretty much exempts all my clients!
Now, one more tip before I close. The laws on capital gains mean that you can buy a distressed home, a foreclosure, fixer-upper, or even build a new home every two years, live in it, and then sell it without tax liabilities! You can invest the money in your next home and eventually own a home without debt or you can just put the money in your pocket, tax free. Pretty neat deal, isn't it?
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