Distressed Sellers Benefit From New Rules
 Mortgage debt on a principal residence that is forgiven by a lender is no longer taxable in many cases; previously, forgiven mortgage debt was considered taxable income. (Debt from buying or improving a principal residence may be forgiven in a short sale, foreclosure or debt restructuring of a property.) The exclusion only applies to indebtedness forgiven in tax years 2007 through 2012 and is limited to $2 million or $1 million for married filing separately.
HINT: Other restrictions apply; consult a knowledgeable tax professional for details. A newly revised Form 982 is used for reporting the exclusion.
 HUD-1 Statement Reveals Overlooked Deduction
Real estate property taxes, as well as state and local income and personal property taxes, are fully deductible.
HINT: If you sold or bought property during the year, you may have paid or been refunded real estate taxes without being aware of it. See your closing statement for any prorations.
Check Form 1098 To Get This Tax Relief
 Qualified home mortgage insurance payments are now deductible for homeowners who purchase or refinance a home from January 1, 2007 through December 31, 2010. The full deduction is available to taxpayers with Adjusted Gross Income (AGI) not greater than $100,000 or $50,000 for married filing separately. Over those incomes, the deduction is phased out and disappears completely for AGIs of $110,000 or $55,000 (married filing separately). In order to take the deduction, you must itemize deductions on your tax return -- see instructions on Schedule A (Form 1040) or IRS Publication 936 for details.
HINT: To find the amount of qualified mortgage insurance you paid (if any), see Box 4 on Form 1098 provided by your lender with amount of interest and mortgage-related expenses you paid during the year.
Investor Breaks Stimulate Landlord Savings
 If you have an adjusted gross income of $100,000 or less (not counting any loss from "passive activities," several adjustments to adjusted gross income or taxable Social Security benefits), you can deduct up to $25,000 in losses from rental real estate against income from other sources. This is an allowable deduction if you owned at least 10% of the property and "actively participated" in its management (for example, if you chose the tenants and approved outlays for maintenance).
If your adjusted gross income is between $100,000 and $150,000, you can still deduct some or all of your losses from rental real estate, depending on amount of loss.
HINT: Don’t forget, if any rent losses were "suspended" in prior years, they are fully deductible in the year the property is sold.
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NEED MORE DEDUCTIONS?
If you want next year’s tax return to look better, buying a home or moving up to a better tax shelter may be the answer. Just contact us and we’ll be happy to help. We can also assist you in selling your home when you get ready to cash in your profits tax-free! |
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