Publication 530 - Tax Information For First-Time Homeowners

•

What you can and cannot deduct on your

Form (and Instructions)

if it is based on the assessed value of the real

tax return.

property and the taxing authority charges a uni-

8396 Mortgage Interest Credit

form rate on all property in its jurisdiction. The

•

The tax credit you can claim if you re-

See How To Get Tax Help, near the end of

tax must be for the welfare of the general public

ceived a mortgage credit certificate when

this publication, for information about getting

and not be a payment for a special privilege

you bought your home.

publications and forms.

granted or service rendered to you.

•

Why you should keep track of adjustments

to the basis of your home. (Your home’s

Deductible Taxes

basis generally is what it costs; adjust-

What You Can and

ments include the cost of any improve-

You can deduct real estate taxes imposed on

ments you might make.)

Cannot Deduct

you. You must have paid them either at settle-

•

What records you should keep as proof of

ment or closing, or to a taxing authority (either

the basis and adjusted basis.

directly or through an escrow account) during

To deduct expenses of owning a home, you

the year. If you own a cooperative apartment,

must file Form 1040 and itemize your deduc-

see Special Rules for Cooperatives, later.

District of Columbia first-time homebuyer

tions on Schedule A (Form 1040). If you itemize,

credit. You may be able to claim a one-time

you cannot take the standard deduction. See the

Where to deduct real estate taxes. Enter the

tax credit of up to $5,000 if you buy a main home

Form 1040 instructions if you have questions

amount of your deductible real estate taxes on

in the District of Columbia. You must reduce the

about whether to itemize your deductions or

line 6 of Schedule A (Form 1040).

basis of your home by the amount of the credit

claim the standard deduction.

Real estate taxes paid at settlement or

you claim. Only purchases after August 4, 1997,

This section explains what expenses you

closing. Real estate taxes are generally di-

and before January 1, 2004, qualify for this

can deduct as a homeowner. It also points out

vided so that you and the seller each pay taxes

credit.

expenses that you cannot deduct. There are two

for the part of the property tax year you owned

The credit is not allowed if you acquired your

primary discussions: real estate taxes and home

the home. Your share of these taxes is fully

home from certain related persons or by gift or

mortgage interest. Generally, your real estate

deductible, if you itemize your deductions.

inheritance.

taxes and home mortgage interest are included

You qualify for the credit if you (and your

in your house payment.

Division of real estate taxes. For federal

spouse if you are married) did not have an own-

income tax purposes, the seller is treated as

Your house payment. If you took out a mort-

ership interest in a main home in the District of

paying the property taxes up to, but not includ-

gage (loan) to finance the purchase of your

Columbia for at least 1 year before buying the

ing, the date of sale. You (the buyer) are treated

home, you probably have to make monthly

new home. Individuals with modified adjusted

as paying the taxes beginning with the date of

house payments. Your house payment may in-

gross income of $90,000 or more ($130,000 or

sale. This applies regardless of the lien dates

clude several costs of owning a home. The only

more in the case of a joint return) cannot claim

under local law. Generally, this information is

costs you can deduct are real estate taxes actu-

the credit. Individuals with modified adjusted

included on the settlement statement you get at

ally paid to the taxing authority and interest that

gross income between $70,000 and $90,000

closing.

qualifies as home mortgage interest. These are

(between $110,000 and $130,000 in the case of

You and the seller each are considered to

discussed in more detail later.

a joint return) can claim only a reduced credit.

have paid your own share of the taxes, even if

Here are some expenses, which may be

Use Form 8859, District of Columbia

one or the other paid the entire amount. You

included in your house payment, that cannot be

First-Time Homebuyer Credit, to figure your

each can deduct your own share, if you itemize

deducted.

credit. See the form and its instructions for more

deductions, for the year the property is sold.

•

information.

Fire or homeowner’s insurance premiums.

•

Example. You bought your home on Sep-

FHA mortgage insurance premiums.

Comments and suggestions. We welcome

tember 1. The property tax year (the period to

•

your comments about this publication and your

The amount applied to reduce the princi-

which the tax relates) in your area is the calen-

suggestions for future editions.

pal of the mortgage.

dar year. The tax for the year was $730 and was

You can e-mail us while visiting our web site

due and paid by the seller on August 15.

You owned your new home during the prop-

Minister’s or military housing allowance. If

You can write to us at the following address:

erty tax year for 122 days (September 1 to De-

you are a minister or a member of the uniformed

cember 31, including your date of purchase).

services and receive a housing allowance that is

Internal Revenue Service

You figure your deduction for real estate taxes

not taxable, you still can deduct your real estate

Tax Forms and Publications

on your home as follows.

taxes and your home mortgage interest. You do

W:CAR:MP:FP

not have to reduce your deductions by your

Enter the total real estate taxes for

1111 Constitution Ave. NW

the real property tax year . . . . . . .

$730

nontaxable allowance.

Washington, DC 20224

Enter the number of days in the

Nondeductible payments. You cannot de-

property tax year that you owned the

duct any of the following items.

property . . . . . . . . . . . . . . . . . .

122

We respond to many letters by telephone.

Divide line 2 by 365 . . . . . . . . . .

.3342

•

Therefore, it would be helpful if you would in-

Insurance, including fire and comprehen-

Multiply line 1 by line 3. This is your

clude your daytime phone number, including the

sive coverage, and title and mortgage in-

deduction. Enter it on line 6 of

area code, in your correspondence.

surance.

Schedule A (Form 1040) . . . . . . .

$244

•

Wages you pay for domestic help.

You can deduct $244 on your return for the

Useful Items

•

year if you itemize your deductions. You are

Depreciation.

You may want to see:

considered to have paid this amount and can

•

The cost of utilities, such as gas, electric-

deduct it on your return even if, under the con-

Publication

ity, or water.

tract, you did not have to reimburse the seller.

•

523

Selling Your Home

Most settlement costs. See Settlement or

Delinquent taxes. Delinquent taxes are un-

closing costs under Cost as Basis, later,

paid taxes that were imposed on the seller for an

527

Residential Rental Property

for more information.

earlier tax year. If you agree to pay delinquent

547

Casualties, Disasters, and Thefts

taxes when you buy your home, you cannot

551

Basis of Assets

deduct them. You treat them as part of the cost

Real Estate Taxes

of your home. See Real estate taxes, later,

555

Community Property

under Cost as Basis.

Most state and local governments charge an

587

Business Use of Your Home

annual tax on the value of real property. This is

Escrow accounts. Many monthly house pay-

936

Home Mortgage Interest Deduction

called a real estate tax. You can deduct the tax

ments include an amount placed in escrow (put

Page 2

Publication 530 - Tax Information For First-Time Homeowners - 2002 Page 2

Related Articles

Related forms

Related Categories