Luxury Valley Homes Monthly Real Estate Newsletter

Page: 1 2 3 4  January 2010 - Page 4 VACATION HOMES Second Home Owners Enjoy More Tax Breaks Vacation homes have separate tax rules that vary according to the owner’s personal-use days. A residence is a vacation home if the owner used it more than 14 days or 10% of the days it was rented during the year (if rented more than 140 days). For a vacation home, all mortgage interest and property taxes are usually deductible, either as rent expenses or as additional itemized deductions. If there was rent income, other property expenses may be deductible, including depreciation, but only up to the amount of the rent income (losses are not allowed). HINT: For non-vacation rental homes, you may claim rent expense deductions other than interest and taxes, even if it results in a loss. When personal use of a vacation home is involved, deductions are determined by allocating expenses, including interest and taxes, between the rental and personal-use periods. If you rent your vacation home (or principal residence) for 14 days or less a year, you do not have to pay taxes on that rent income. DEPRECIATION Plan Ahead For Recapture Of Depreciation Taking depreciation on property -- whether a principal residence, rental property or second home -- increases your capital gain (and therefore tax liability) upon sale. Tax treatment of depreciation claimed on real property varies depending on whether depreciation was taken before or after May 6, 1997. HINT: Taxation of real-property depreciation is a complicated subject. For detailed information, consult IRS Publication 523 "Selling Your Home" (available online at www.IRS.gov) or contact a tax professional. IRS PUBLICATIONS Shelf Help From The Tax Man No one would ever describe the U.S. tax code as being simple. In all its complexity, though, homeowners can find significant tax benefits -- well worth the trouble of reading instructions, keeping accurate records and filing multiple forms. If you own a home, you'll want to take advantage of all the tax breaks you're entitled to. If you don't own a home yet, you may want to consider whether buying one could shelter more of your income from taxation. Whether you prepare your own tax returns or pay a professional, gathering information now for your 2009 return could earn you an early tax refund or at least a less stressful filing than waiting until April. Here's a list of IRS publications that address issues of particular concern to homeowners. You can view or download them online at www.IRS.gov/publications or request copies by calling (800) 829-3676. You may also be able to find them at your local library. Pub. 521 Moving Expenses Pub. 523 Selling Your Home Pub. 527 Residential Rental Property (Including Rental of Vacation Homes) Pub. 530 Tax Information for Homeowners Pub. 547 Casualties, Disasters, and Thefts Pub. 551 Basis of Assets Pub. 552 Recordkeeping for Individuals Pub. 553 Highlights of Tax Changes Pub. 587 Business Use of Your Home Pub. 936 Home Mortgage Interest Deduction Pub. 946 How to Depreciate Property HELP US HELP OTHERS Do you have friends, neighbors or relatives who are thinking about buying or selling a home? We hope you'll pass this newsletter on to them or provide them with our contact information. We'll appreciate all your referrals in 2010 and beyond. Happy New Year! Page: 1 2 3 4

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