Publication 530 - Tax Information For First-Time Homeowners

•

❏ 8859 District of Columbia First-Time

How you treat items such as settlement

property and the taxing authority charges a uni-

and closing costs, real estate taxes, sales

Homebuyer Credit

form rate on all property in its jurisdiction. The

taxes, home mortgage interest, and re-

See How To Get Tax Help, near the end of

tax must be for the welfare of the general public

pairs.

this publication, for information about getting

and not be a payment for a special privilege

publications and forms.

granted or service rendered to you.

•

What you can and cannot deduct on your

tax return.

•

Deductible Real Estate Taxes

The tax credit you can claim if you re-

What You Can and

ceived a mortgage credit certificate when

You can deduct real estate taxes imposed on

you bought your home.

Cannot Deduct

you. You must have paid them either at settle-

•

Why you should keep track of adjustments

ment or closing, or to a taxing authority (either

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

directly or through an escrow account) during

To deduct expenses of owning a home, you

basis generally is what it costs; adjust-

the year. If you own a cooperative apartment,

must file Form 1040 and itemize your deduc-

ments include the cost of any improve-

see Special Rules for Cooperatives, later.

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

ments you might make.)

you cannot take the standard deduction.

Where to deduct real estate taxes. Enter the

•

What records you should keep as proof of

This section explains what expenses you

amount of your deductible real estate taxes on

the basis and adjusted basis.

can deduct as a homeowner. It also points out

Schedule A (Form 1040), line 6.

expenses that you cannot deduct. There are

four primary discussions: real estate taxes,

Real estate taxes paid at settlement or clos-

Comments and suggestions. We welcome

sales taxes, home mortgage interest, and mort-

ing. Real estate taxes are generally divided so

your comments about this publication and your

gage insurance premiums. Generally, your real

that you and the seller each pay taxes for the

suggestions for future editions.

estate taxes, home mortgage interest, and mort-

part of the property tax year you owned the

You can write to us at the following address:

gage insurance premiums are included in your

home. Your share of these taxes is fully deducti-

house payment.

ble, if you itemize your deductions.

Internal Revenue Service

Division of real estate taxes. For federal

Your house payment. If you took out a mort-

Individual Forms and Publications Branch

income tax purposes, the seller is treated as

SE:W:CAR:MP:T:I

gage (loan) to finance the purchase of your

paying the property taxes up to, but not includ-

home, you probably have to make monthly

1111 Constitution Ave. NW, IR-6526

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

house payments. Your house payment may in-

Washington, DC 20224

as paying the taxes beginning with the date of

clude several costs of owning a home. The only

sale. This applies regardless of the lien dates

costs you can deduct are real estate taxes actu-

We respond to many letters by telephone.

under local law. Generally, this information is

ally paid to the taxing authority, interest that

Therefore, it would be helpful if you would in-

included on the settlement statement you get at

qualifies as home mortgage interest, and mort-

clude your daytime phone number, including the

closing.

gage insurance premiums. These are discussed

area code, in your correspondence.

You and the seller each are considered to

in more detail later.

You can email us at *taxforms@irs.gov. (The

have paid your own share of the taxes, even if

Here are some expenses, which may be

asterisk must be included in the address.)

one or the other paid the entire amount. You

included in your house payment, that cannot be

Please put “Publications Comment” on the sub-

each can deduct your own share, if you itemize

deducted.

ject line. Although we cannot respond individu-

deductions, for the year the property is sold.

•

ally to each email, we do appreciate your

Fire or homeowner’s insurance premiums.

feedback and will consider your comments as

•

Example. You bought your home on Sep-

The amount applied to reduce the princi-

we revise our tax products.

tember 1. The property tax year (the period to

pal of the mortgage.

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

Ordering forms and publications. Visit

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

to download forms and

Minister’s or military housing allowance. If

due and paid by the seller on August 15.

publications, call 1-800-829-3676, or write to the

you are a minister or a member of the uniformed

You owned your new home during the prop-

address below and receive a response within 10

services and receive a housing allowance that is

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

days after your request is received.

not taxable, you still can deduct your real estate

cember 31, including your date of purchase).

taxes and your home mortgage interest. You do

You figure your deduction for real estate taxes

National Distribution Center

not have to reduce your deductions by your

on your home as follows.

P.O. Box 8903

nontaxable allowance.

Enter the total real estate taxes for

Bloomington, IL 61702-8903

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

$730

Nondeductible payments. You cannot de-

Enter the number of days in the

duct any of the following items.

Tax questions. If you have a tax question,

property tax year that you owned the

•

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

122

check the information available on

Insurance (other than mortgage insurance

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

.3342

or call 1-800-829-1040. We cannot answer tax

premiums), including fire and comprehen-

Multiply line 1 by line 3. This is your

questions sent to either of the above addresses.

sive coverage, and title insurance.

deduction. Enter it on Schedule A

•

(Form 1040), line 6 . . . . . . . . . . .

$244

Wages you pay for domestic help.

Useful Items

•

You can deduct $244 on your return for the

Depreciation.

You may want to see:

year if you itemize your deductions. You are

•

The cost of utilities, such as gas, electric-

considered to have paid this amount and can

Publication

ity, or water.

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

❏ 523

Selling Your Home

•

tract, you did not have to reimburse the seller.

Most settlement costs. See Settlement or

❏ 527

closing costs under Cost as Basis, later,

Residential Rental Property

Delinquent taxes. Delinquent taxes are un-

for more information.

paid taxes that were imposed on the seller for an

❏ 547

Casualties, Disasters, and Thefts

•

earlier tax year. If you agree to pay delinquent

Forfeited deposits, down payments, or

❏ 551

Basis of Assets

taxes when you buy your home, you cannot

earnest money.

deduct them. You treat them as part of the cost

❏ 555

Community Property

of your home. See Real estate taxes, later,

❏ 587

Real Estate Taxes

Business Use of Your Home

under Basis.

❏ 936

Home Mortgage Interest Deduction

Most state and local governments charge an

Escrow accounts. Many monthly house pay-

annual tax on the value of real property. This is

ments include an amount placed in escrow (put

Form (and Instructions)

called a real estate tax. You can deduct the tax if

in the care of a third party) for real estate taxes.

❏ 8396 Mortgage Interest Credit

it is based on the assessed value of the real

You may not be able to deduct the total you pay

Page 2

Publication 530 (2007)

Publication 530 - Tax Information For First-Time Homeowners - 2007 Page 2

Related Articles

Related forms

Related Categories