We purchased our home recently and the closing date is Jan.4 2008. Can we pay points and home improvement cost in 2007 and get tax deduction in 2007? Thanks!
2007-12-03 23:55:52 · 4 answers · asked by R, Dash 1 in Business & Finance ➔ Taxes ➔ United States
For mortgage interest and points to be deductible, one must both pay them and have a legal obligation to do so. If you prepay in 2007 the points will not be deductible, as you will not have a legal obligation to pay them until the closing in 2008.
2007-12-04 02:40:16 · answer #1 · answered by taxreff 7 · 0⤊ 0⤋
Home improvement costs are generally not deductible (depending on whether a portion of the house is rented or used in a trade or business) - they will be capitalized and added to the cost basis of the house and will reduce any future gains you may recognize upon the sale of the property.
If you can get your mortgage company to close on the loan prior to settlement then the points and any interest paid will be deductible in the year of payment - however, that is very unlikely. The real question is, why are you paying points when interest rates are dropping? If you can rethink that position, please do.
2007-12-04 01:28:23 · answer #2 · answered by Anonymous · 0⤊ 1⤋
No, even if you paid the points, you do not own the house until closing. You cannot deduct interest on a home that you do not own.
Your home improvements are not deductible unless your home is used for business purposes.
2007-12-04 02:43:34 · answer #3 · answered by ninasgramma 7 · 1⤊ 0⤋
No, you take deductions in the year you pay them, and you won't be paying them until closing so you will take them for 2008.
2007-12-04 00:54:41 · answer #4 · answered by Judy 7 · 4⤊ 0⤋