My friend and I bought a house this year. Now I am stumped as to what to do for income tax time. Can both of us file for the house on our income taxes or just one of us? What about the improvements we have done such as a new kitchen and new bathrooms and baseboards etc. Can that be claimed on income taxes as well? Someone please help!!
2007-01-21 09:35:51 · 9 answers · asked by Queen_Julia 1 in Business & Finance ➔ Taxes ➔ United States
My friend and I bought a house this year. Now I am stumped as to what to do for income tax time. Can both of us file for the house on our income taxes or just one of us? What about the improvements we have done such as a new kitchen and new bathrooms and baseboards etc. I read somewhere that "repairs" can not be claimed but "improvements" can be. I guess maybe if I was to itemize them? How would this work? Someone please help!!
2007-01-21 09:49:03 · update #1
So since both of our names are on the deed and the loan and we split everything 50/50 then we can both claim? I guess I will need to get someone to assist with Taxes this year before I mess this one up!
2007-01-21 09:55:25 · update #2
Improvements are not deductible as such. They are added to the cost when dewtermining your 'tax basis' in the house. This is important in determining any captial gain when the home is sold. Under current rules, you can exculde up to $250,000 of gain when selling a home that was you primary residence for 2 of the last 5 years. Interest and property taxes can be split as long as both names are on the loan and the deed. You must be legally obligated to pay and actually pay these costs in order to claim the deductions on your tax return.
2007-01-21 09:47:50 · answer #1 · answered by STEVEN F 7 · 0⤊ 0⤋
Yes, you can each claim half of mortgage and property tax on Schedule A. However, because you each have to exceed your standard deduction, then chances are neither one of you will benefit or very little. My suggestion is that you have an agreement to alternative on who takes the whole deduction each year.
Costs for improvements are not tax deductible. You will add the costs for improvements to the cost of the house, and thus increase the base for the home. When you sell, only the amount exceeding the new base is income and therefore taxable. If you decide to do more improvements later, the base will be adjusted again.
Best wishes.
2007-01-21 22:22:15 · answer #2 · answered by JQT 6 · 0⤊ 0⤋
You are asking several questions in one.
Property taxes: You have to be on the deed to claim. If you are, you get to deduct whatever each of you paid. So if you are splitting bills down the middle and the tax is $2,000 you each get to deduct $1,000
Mortgage Interest: You have to be legally responsible for repaying the loan. If you are both on the Promissory Note (or whatever your state calls it) the same situation applies.
Improvements: These are added to the basis of the house and are only relevant when you sell or if you are renting a room to someone else who is not on the deed or mortgage. They may also be relevant when your property gets re-appraised for property taxes.
You must be able to itemize on Schedule A to take the mortgage interest or property tax deductions. For a single person that means your deductions must exceed $5,150. As well as those items, the other main ones are state income or sales taxes and charitable contributions.
2007-01-21 17:51:06 · answer #3 · answered by skip 6 · 0⤊ 0⤋
Yes you can both claim the interest paid and the property taxes. Just split the amounts on the 1098 and claim your shares. The IRS shouldn't even question it but if they do, you will be able to show them what you did.
You can't deduct improvements to the home on your yearly tax return, but you add those costs to the cost of the house to decrease gain when you sell it. Keep all your receipts and your closing paperwork so you will have what you need when you do sell.
2007-01-21 18:21:43 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Improvements can add to the basis and decrease taxes when you sell, if you're liable for any, but can't be deducted on your return the year when you pay them. Repairs can't be claimed at all, at any time.
As to claiming the property taxes and mortgage interest, you might be able to split them if you both itemize and you're both on the mortgage. You can't both take the whole amount. The person whose social security number is on the loan, if just one is, would be the one to get the paperwork from the lender.
2007-01-21 19:24:43 · answer #5 · answered by Judy 7 · 0⤊ 0⤋
My humble recommendation (and I am new homeowner this year too): if you have now have become a homeowner after saving money for a downpayment, budgeting, and the like (or not?) don't you think it's wise at this point in your life to chalk over the 60-70 bucks it costs to use a CPA to do your taxes for you?
2007-01-21 18:05:29 · answer #6 · answered by El Pajaro Loco 3 · 1⤊ 0⤋
Actually No. If you both did that your basically gettin double the amount and then in time they will find out and you'll have to pay it with your own money.
2007-01-21 17:48:12 · answer #7 · answered by queenpravato 1 · 0⤊ 1⤋
You can only deduct mortgage interest, not improvements. And you can't "double-dip" .... only ONE can claim.
2007-01-21 17:43:44 · answer #8 · answered by Bill P 5 · 0⤊ 0⤋
No.
2007-01-21 17:39:22 · answer #9 · answered by Country Boy 7 · 0⤊ 0⤋