Tax Time Tips
It’s everyone’s favorite time of year – tax time! If you bought or sold a house in 2011, remember to bring your HUD1 Closing Statement with you when you’re preparing your tax files. Here are some things to remember:
If you bought:
- Your mortgage company will send you a 1098, which you’ll use to deduct the interest paid in 2011. It will NOT include any prepaid interest, origination fees, etc. that you paid as part of your closing costs. They ARE deductible, but you must remember to take them from your HUD1.
- If the property was an investment, remember to show your tax preparer any prepaid condo/HOA fees or taxes shown on your HUD1.
- Also for investment properties, don’t forget to save all of those receipts for any work you did on the property.
- If you sold stocks or bonds to use as your down-payment, don’t forget to tell your tax preparer about those as well, although you should get a statement from the financial institution you went through.
If you sold:
- If this home was your primary residence for at least 2 years, you’ll most likely be exempt from paying taxes on your Capital Gains (up to $250k if you’re single, or up to $500k if you’re married). Make sure when you show the sale price to your tax preparer, you also show them how much you paid.
- Bring your HUD1 closing statement with you to show any taxes paid as a proration or credit to the purchaser, or any other costs associated with selling.
- If this was an investment, you’ll also have to consider depreciation during the length of which you owned the home when trying to calculate taxes owed on the sale.
All of my clients who bought or sold with me last year received a courtesy copy of their HUD1 the second week of January. If you can’t find yours, try contacting your agent or the title company who did your closing. It’s really important to have that on hand when doing your taxes! Remember though, I’m not a CPA, so double check with your tax preparer on any other deductions I have missed (I am sure there are some I don’t know since the tax laws are always changing!!) You can read more from a CPA: Homeowners Tax Tips.