I bouht my home in April 2005 and refinanced in June 2006 and took out 40K. I have a tax question: I live in California, is it ABSOLUTLY necessary to report this to my tax man? If I dont, what WILL happen? Please be honest and not exagerated.
2007-01-11 07:57:57 · 4 answers · asked by Justme 2 in Business & Finance ➔ Taxes ➔ United States
I cant thank you guys enough!
2007-01-11 08:34:05 · update #1
It is not necessary to report the money you got from the loan. It is necessary that you tell your tax man about the loan, there are fees and points that could be deducted as well as interest you pay on the loan.
The money you got as a result of the loan is not taxable in itself.
I too reside in the Golden State
I hope this has been of some help to you, good luck.
"FIGHT ON"
2007-01-11 08:04:52 · answer #1 · answered by Skip 6 · 3⤊ 0⤋
You NEVER pay taxes on equity you take out on a refinance.
When it comes time to sell your home, provided you have lived in the property for at least 2 of the prior 5 years, you can earn up to $250,000 in tax-free capital gains ($500,000 for a married couple).
Unless you think you'll have profited MORE than $250K when you sell your home, you'll never owe taxes on that money.
The only reason to report it to your tax man is that some items on your settlement statement could be deductible, but not show up on your 1098 interest-paid form from your mortgage company. Like the per diem interest, deed tax, etc... And any points you might have paid.
It can ONLY benefit you from telling your tax advisor.
2007-01-11 16:05:19 · answer #2 · answered by Anonymous · 2⤊ 0⤋
This is not income and therefore you don't have to report it as such. There are some implications with deducting the interest paid.
You should bring the settlement statement from the loan transaction with you so that you can deduct the finance fees, (origination fee and points) if you paid any.
Rule of thumb, if you owe more against the house than it is worth, you might not be able to deduct all the interest.
2007-01-11 16:34:35 · answer #3 · answered by Culture Warrior 4 · 2⤊ 0⤋
Nothing happens. It is your money, it does not count as income.
2007-01-11 16:02:26 · answer #4 · answered by Anonymous · 2⤊ 0⤋