Tax question: first time homeowner and grad student?

Question

This past Sept I purchased my first home (no points, and only about $1,000 down after paying closing and taxes) I am also a part- graduate student and am working full time, I am trying to get a picture of what my taxes will be like this year.

I am 25 and un-married, so the only exemption I will take is me.

1. My Fiancee's father gave me $5,000 for the closing costs (have a gift letter), Do I have to claim this on my taxes?

2. I know nothing about the lifetime learning/ HOPe credits are these something that i can claim?

3. Can i expect a larger tax return then last year because i purchased the house? I only made 3 mortgage payments in 2006. My total gross income will be under 37k, with about 2,500 going to pension funds

My taxes are escrowed, but I did have to pay a large chunk of property taxes back to the owner at settlement (the taxes were due by Oct 1, and the previous owner had already paid them0

Answer 1

A gift isn't taxable to the recipient, and $5000 is well under the limit where the giver has to report it either. No, you don't claim this on your taxes.

Hope credit is not available to grad students, is only for the first two years of post-secondary education. The Lifetime Learning credit is most likely available to you. Unless you exceed income limits, which at $37,000 is not a problem, you would get a credit of 20% of your eligible expenses.

The house purchase might or might not get you anything extra on taxes this year, but almost surely will for future years. For 2006, the standard deduction for a person filing as single is $5150. If your total itemized deductions exceeds this, then you'd benefit from itemizing. The amount you'd save in taxes would be the difference between standard and itemized deductions times your tax bracket. Some itemized deductions would be any mortgage interest and real estate taxes you paid, any charitable contributions, and state and local income taxes if your location has them, otherwise a deduction for sales tax. There might also be other itemized deductions you can take - see the instructions for 1040 schedule A - you can download them at irs.gov.

Answer 2

1) You will not have to pay taxes on the gift of 5000
2) Hope and Lifetime Learning are both education credits however Hope is only available for 2 years. You need to know what has been claimed in the past even if it was claimed by your parents
3) The house is a bit iffy, make sure you take your closing statement with you when you file your taxes. Some of the items you payed at closing can be included with your interest deduction

Your standard deduction will only be 5150 for 2006 if your itemized deductions add up to more then it would be wise to pay your property taxes before the end of the year.

A few items that you need to consider is
Chariable donations(cash and items)
Property taxes on your vehicles
Real estate taxes
State and Local income taxes on your pay stub/W2
Medical expenses that exceed 7.5 % of your income

Answer 3

Because it is so late in the year, the benefits of owning a home might not kick in until next year. Consider deferring paying your property taxes until after January 1. (Some people pay them by December 31 to get the deduction in the current year.)

No, the gift doesn't have to be included - unless there is something other than usual.

Yes to #2. Take a spin through IRS.gov to learn more. (There are publications on education credits.)

Answer 4

1. You never have to claim any gifts. Only the the person who is giving the gift may be taxed. I believe that amount anything over $13,000 for 2006
2. You can claim Hope credit for 2 years. I suggest you do.
Once you exhaust Hope credit, you may look into Lifetime learning credit.
3.You can deduct mortgage interest paid. Your lender will send you a 1099 form letting you know how much you paid.
Depending where you live, you will not be able to take a deduction for Real Estate taxes. In most states, real estate taxes are 1 year behind. Therefore the portion of 2006 real estate taxes you will be able to deduct in 2007.
Also, in some states if you own a residence, you are able to take a home owner's credit. You may want to check into that.

Answer 5

Judy is completely correct on everything.

I will just add this to it.

You can take a maximum credit of $2,000 on the Lifetime Learning Credit. It starts to phaseout when your modified AGI is above $43k and completely phaseouts out at $53k. Since you're under the phaseout then you would take 20% of all your qualified education expense as your credit.

Other than that, listen to Judy.