Real Estate Tax Breaks
Most homeowners are keenly aware of the interest tax deduction on their home loan, but there are many other tax breaks that are often overlooked at income tax time. Pro-rated property taxes and mortgage interest in the year of sale are deductible. You will find these amounts listed on your closing/ settlement statement. If you paid off your mortgage and had to pay a pre-payment penalty, it qualifies as tax-deductible interest.
If you paid an "origination fee" on a home loan at the time of purchase, the IRS does not allow you to deduct this amount. However, any "discount points" paid above and beyond a 1% loan origination are deductible for purchase money, except when you refinance.
Certain items don't qualify as deductions, but can be added to the cost basis of your home. Such items include transfer taxes, recording and title fees, and special local property tax assessments for new sidewalks, streets, or sewers.Don't be intimidated by the tax code! A little research or consultation with an expert can help you maximize your real estate tax advantages.