New Home Owner - Tax Questions

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primetime
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New Home Owner - Tax Questions

Post by primetime »

My situation:

-No kids
-Closed on home Aug 2013
-No lapse in working for me, transitioned to a new job in Jan 13'
-Work paid for all closing costs on the home accept owners title insurance
-First time buyer
-Fiancee has been living with me since 2012
-She has student loans that I've been making the payments on
-We are getting married in Feb 2014
-Fiance has not worked, and has had no income in 2013
-I have a company car, which I report % personal miles vs % work related, and this is shown on my pay stubs. I've had it since Feb of 2013.

Just wanted to check with my fellow Bogleheads to ensure that I am correct on these points, as this year my 2013 tax situation is completely different from previous years.

1. To maximize my return, I should file as an individual, and claim my fiancee as a dependent. I can't claim married because we aren't married yet, and that would give me a std deduction of $6,100 + reduction in taxable income of $3900. I'd prefer to get the $12,200 for married joint-filing couples. Should be nice for 2014. :mrgreen:
2. Even though I paid interest on my fiances loans, I can't write any of that off because they are not in my name.
3. She shouldn't file a return for fed, local or state.
4. Since I closed in Aug, that's only 5 months of interest. Claiming the standard deduction may wind up being better. I'm assuming my HUD statement will tell me how much in property tax I paid from Aug to Dec 2013?
5. With a company car, any personal benefit I receive dollar wise is income to me. The government requires the value to be reported as wages, subject to FICA, federal income tax, and state income tax? I'm assuming this is reported somewhere on the W2?
Last edited by primetime on Thu Jan 23, 2014 6:25 am, edited 1 time in total.
HouseStark
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Re: New Home Owner - Tax Questions

Post by HouseStark »

primetime wrote:My situation:

Just wanted to check with my fellow Bogleheads to ensure that I am correct on these points, as this year my 2013 tax situation is completely different from previous years.

1. To maximize my return, I should file as an individual, and claim my fiance as a dependent. I can't claim married because we aren't married yet, and that would give me a std deduction of $6,100 + reduction in taxable income of $3900. I'd prefer to get the $12,200 for married joint-filing couples. Should be nice for 2014. :mrgreen:
2. Even though I paid interest on my fiances loans, I can't write any of that off because they are not in my name.
3. She shouldn't file a return for fed, local or state.
4. Since I closed in Aug, that's only 5 months of interest. Claiming the standard deduction may wind up being better. I'm assuming my HUD statement will tell me how much in property tax I paid from Aug to Dec 2013?
5. With a company car, any personal benefit I receive dollar wise is income to me. The government requires the value to be reported as wages, subject to FICA, federal income tax, and state income tax? I'm assuming this is reported somewhere on the W2?
1. Since you were not married on 12/31/2013, you can only file as Single. If you lived with your fiancé for all of 2013 and she had no income you should be able to claim her as a dependent.
2. Correct, you can not claim any tax benefit, since you are not obligated to pay fiances' student loans.
3. She has no reason to file a tax return.
4. Standard or itemized, whichever is higher. Property tax would be on the HUD-1 generally. It would be 5/12 of annual RE tax.
5. Your cash value of the personal use of company car will be included in your W-2 box 1 as taxable income. The amount is often reported in box 14. If your company paid for closing costs on your new home, that should also be included as a taxable benefit.
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grabiner
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Re: New Home Owner - Tax Questions

Post by grabiner »

primetime wrote:4. Since I closed in Aug, that's only 5 months of interest. Claiming the standard deduction may wind up being better. I'm assuming my HUD statement will tell me how much in property tax I paid from Aug to Dec 2013?
Your HUD-1 will show what you paid at closing, and for which dates. If the HUD-1 only went through September 30 (because your city bills property taxes on October 1), you may have paid additional tax from your escrow account.
5. With a company car, any personal benefit I receive dollar wise is income to me. The government requires the value to be reported as wages, subject to FICA, federal income tax, and state income tax? I'm assuming this is reported somewhere on the W2?
Yes, it will be counted as wages on your W-2; there may be a note of explanation. Likewise, your employer reimbursements for closing costs are taxable; your employer might also give you a gross-up to cover these costs, so that you receive $6000 to cover $4500 closing costs and the expected $1500 tax due on that $4500.
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cheese_breath
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Re: New Home Owner - Tax Questions

Post by cheese_breath »

HouseStark wrote: .......

1. Since you were not married on 12/31/2013, you can only file as Single. If you lived with your fiancé for all of 2013 and she had no income you should be able to claim her as a dependent.

.......
According to IRS Publication 501,
You are allowed one exemption for each person you can claim as a dependent. You can claim an exemption for a dependent even if your dependent files a return.

The term “dependent” means:

A qualifying child, or

A qualifying relative.
If I understand correctly your fiance does not qualify as a dependent.
The surest way to know the future is when it becomes the past.
Retread
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Re: New Home Owner - Tax Questions

Post by Retread »

cheese_breath wrote:
HouseStark wrote: .......

1. Since you were not married on 12/31/2013, you can only file as Single. If you lived with your fiancé for all of 2013 and she had no income you should be able to claim her as a dependent.

.......
According to IRS Publication 501,
You are allowed one exemption for each person you can claim as a dependent. You can claim an exemption for a dependent even if your dependent files a return.

The term “dependent” means:

A qualifying child, or

A qualifying relative.
If I understand correctly your fiance does not qualify as a dependent.
You didn't read far enough. It also includes someone who lives with you for the entire year.
Bruce
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tomd37
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Re: New Home Owner - Tax Questions

Post by tomd37 »

Yep! I have this same situation every year where the non-related person qualifies as a dependent, but the taxpayer qualifies for only single filing status.
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Kosmo
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Re: New Home Owner - Tax Questions

Post by Kosmo »

primetime wrote:3. She shouldn't file a return for fed, local or state.
Depends on the state and local laws. I don't believe all states have the same dependent status and filing requirements as the federal government. She may have to fill out the forms showing no income and no tax due.
primetime wrote:4. Since I closed in Aug, that's only 5 months of interest. Claiming the standard deduction may wind up being better. I'm assuming my HUD statement will tell me how much in property tax I paid from Aug to Dec 2013?
The form 1098 you get from the mortgage company will have all this information. Fill out a dummy schedule A and see if that all adds up to more than the standard deduction.
Traveler
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Re: New Home Owner - Tax Questions

Post by Traveler »

Please tell me he can't claim head of household since he has a "dependent". I'm single and am the head of my household yet I can't claim that. Irks me that someone can have a non-relative adult living with them and get to claim a dependent, possibly head of household. Single people get screwed on taxes.
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Re: New Home Owner - Tax Questions

Post by jimb_fromATL »

Retread wrote:
cheese_breath wrote:
HouseStark wrote: .......

1. Since you were not married on 12/31/2013, you can only file as Single. If you lived with your fiancé for all of 2013 and she had no income you should be able to claim her as a dependent.

.......


According to IRS Publication 501,

You are allowed one exemption for each person you can claim as a dependent. You can claim an exemption for a dependent even if your dependent files a return.

The term “dependent” means:

A qualifying child, or

A qualifying relative.


If I understand correctly your fiance does not qualify as a dependent.

You didn't read far enough. It also includes someone who lives with you for the entire year.
Bruce


What do y'all reckon this part shown below in red in table 5 means?
  • "...
    Table 5. Overview of the Rules for Claiming an Exemption for a Dependent

    CAUTION
    This table is only an overview of the rules. For details, see the rest of this publication.

    You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer.

    You cannot claim a married person who files a joint return as a dependent unless that joint return is filed only to claim a refund
    of withheld income tax or estimated tax paid.

    You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident
    of Canada or Mexico.

    You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative...."

jimb
pshonore
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Re: New Home Owner - Tax Questions

Post by pshonore »

A "qualifying relative" has several definitions. One of them is a person who lived with you all year, is not a qualfying child, and for who you provided more than 1/2 their support, and whose gross income is less than the personanl exemption amount ($3900). They DO NOT have to be a blood relative.

He can claim his fiance provided she neets those criteria.
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Re: New Home Owner - Tax Questions

Post by Ged »

Traveler wrote:Please tell me he can't claim head of household since he has a "dependent". I'm single and am the head of my household yet I can't claim that. Irks me that someone can have a non-relative adult living with them and get to claim a dependent, possibly head of household. Single people get screwed on taxes.
Girlfriend is one of the examples of a non-qualifying person. No head of household.
pshonore
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Re: New Home Owner - Tax Questions

Post by pshonore »

Generally, you need a "qualifying child" to claim HOH (although there are exceptions for certain blood relatives)
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Ged
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Re: New Home Owner - Tax Questions

Post by Ged »

qualifying relative...

The person either (a) must be related to you in one of the
ways listed under Relatives who do not have to live with you,
or (b) must live with you all year as a member of your
household
(and your relationship must not violate local law).

So does where you live have some old fashioned laws? I think a few places still have cohabitation laws...
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jimb_fromATL
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Re: New Home Owner - Tax Questions

Post by jimb_fromATL »

pshonore wrote:A "qualifying relative" has several definitions. One of them is a person who lived with you all year, is not a qualfying child, and for who you provided more than 1/2 their support, and whose gross income is less than the personanl exemption amount ($3900). They DO NOT have to be a blood relative.

He can claim his fiance provided she neets those criteria.
Can you show the specific section of the tax code that spells that out ... that could be cited if you happened to be audited? It would be interesting to know.

jimb
tomd37
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Re: New Home Owner - Tax Questions

Post by tomd37 »

jimb,
Not familiar with and cannot quote tax code, but pages 26 and 32-35 of the 2013 Publication 17 have more information.
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cheese_breath
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Re: New Home Owner - Tax Questions

Post by cheese_breath »

jimb_fromATL wrote:
pshonore wrote:A "qualifying relative" has several definitions. One of them is a person who lived with you all year, is not a qualfying child, and for who you provided more than 1/2 their support, and whose gross income is less than the personanl exemption amount ($3900). They DO NOT have to be a blood relative.

He can claim his fiance provided she neets those criteria.
Can you show the specific section of the tax code that spells that out ... that could be cited if you happened to be audited? It would be interesting to know.

jimb
Bruce is right. I didn't read far enough. On page 19 of Pub 501
Member of Household or
Relationship Test


To meet this test, a person must either:

1. Live with you all year as a member of your household, or
2. Be related to you in one of the ways listed under Relatives who do not have to live with you.
OP's fiancé would seem to qualify under condition 1.
The surest way to know the future is when it becomes the past.
Topic Author
primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

I can claim her as a dependant, but have to file as single. I can't claim HOH.

Thanks to all those that responded.
sscritic
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Re: New Home Owner - Tax Questions

Post by sscritic »

jimb_fromATL wrote: Can you show the specific section of the tax code that spells that out ... that could be cited if you happened to be audited? It would be interesting to know.

jimb
I always start at 26 USC (at cornell law)
Subtitle A is Income Taxes (§§ 1–1564)
Chapter 1 is NORMAL TAXES AND SURTAXES (§§ 1–1400U3)
Subchapter B is Computation of Taxable Income (§§ 61–291)
Part V is DEDUCTIONS FOR PERSONAL EXEMPTIONS (§§ 151–153)
§§ 151 is Dependent defined
(d) Qualifying relative
For purposes of this section—
(1) In general
The term “qualifying relative” means, with respect to any taxpayer for any taxable year, an individual—
  • (A) who bears a relationship to the taxpayer described in paragraph (2),
    (B) whose gross income for the calendar year in which such taxable year begins is less than the exemption amount (as defined in section 151 (d)),
    (C) with respect to whom the taxpayer provides over one-half of the individual’s support for the calendar year in which such taxable year begins, and
    (D) who is not a qualifying child of such taxpayer or of any other taxpayer for any taxable year beginning in the calendar year in which such taxable year begins.
(2) Relationship
For purposes of paragraph (1)(A), an individual bears a relationship to the taxpayer described in this paragraph if the individual is any of the following with respect to the taxpayer:
  • (A) A child or a descendant of a child.
    (B) A brother, sister, stepbrother, or stepsister.
    (C) The father or mother, or an ancestor of either.
    (D) A stepfather or stepmother.
    (E) A son or daughter of a brother or sister of the taxpayer.
    (F) A brother or sister of the father or mother of the taxpayer.
    (G) A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
    (H) An individual (other than an individual who at any time during the taxable year was the spouse, determined without regard to section 7703, of the taxpayer) who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer’s household.
So there are two requirements under (H): same principal place of abode (not "living with") and member of household.
(f) Other definitions and rules
For purposes of this section—
...
(3) Determination of household status
An individual shall not be treated as a member of the taxpayer’s household if at any time during the taxable year of the taxpayer the relationship between such individual and the taxpayer is in violation of local law.
Now if I only knew what an abode is and what principal means.

P.S. You can usually find the code you are looking for by starting at the top, as I did here. Sometimes you have to follow a link or reference, and while I sometimes get lost in the forest, there are usually a few breadcrumbs left along the way to get you to where you want to go.
Retread
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Re: New Home Owner - Tax Questions

Post by Retread »

cheese_breath wrote:Bruce is right. I didn't read far enough.
Thanks!
'Bruce
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Topic Author
primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

Just a few more questions....

My 1098 reads $2692.79 in box 1, "Mortage Interest recieved from Payer/Borrower"
It has $1884.00 in box 2, "Points paid on purchase of principle residence"
In box 5, it says $0.00 for "real estate taxes"

No mention of personal property taxes paid on this form.

I contacted my county tax office and property taxes were due in Feb and July of 2013. I closed on my home in Aug of 2013. At closing, I put in 5 months worth of taxes into escrow. This is reflected in box 1005 on my HUD-1 statement.

So with that said....

1. For 2013, even though I put money in escrow, since the tax payments were made by the previous owner, I don't put in anything for personal property taxes paid for 2013, correct?
2. I'm using OLT.com software to do my taxes. In the itemizing mortgage interest section it states: "Enter home mortgage interest and points reported to you on Form 1098." Would this be $2692.79 + $1884.00 for a total of $4576.79 that I enter into this box? On the 1098 form it reads:

Box 2 shows points you or the seller paid this year for the purchase of your principal residence that are required to be reported to you. Generally, these points are fully deductible in the year paid, but you must subtract seller paid points from the basis of your residence. Other points not reported in box 2 may also be deductible.

Based on this, is the $4576.79 figure correct? I don't recall having to pay any "points" at closing, yet this figure is showing up on the 1098 form. Is there a specific line on my HUD-1 statement that would show these points? My interest rate is 4.25% and at closing there was a 1% origination charge, but that was paid for by my work as seen in line 801 of the HUD-1 statement.
HouseStark
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Re: New Home Owner - Tax Questions

Post by HouseStark »

primetime wrote: My 1098 reads $2692.79 in box 1, "Mortage Interest recieved from Payer/Borrower"
It has $1884.00 in box 2, "Points paid on purchase of principle residence"
In box 5, it says $0.00 for "real estate taxes"

No mention of personal property taxes paid on this form.

I contacted my county tax office and property taxes were due in Feb and July of 2013. I closed on my home in Aug of 2013. At closing, I put in 5 months worth of taxes into escrow. This is reflected in box 1005 on my HUD-1 statement.

1. For 2013, even though I put money in escrow, since the tax payments were made by the previous owner, I don't put in anything for personal property taxes paid for 2013, correct?
I think you mean real estate taxes, not personal property taxes. Personal property means things like cars and the battle droid I'm building in my garage, but never mind that. Since RE taxes are due in Feb and July, you are correct that they would have been paid by the previous owner before closing and likewise, there would be no RE taxes paid by you for the mortgage servicer to report on the 1098. However, if you look at your closing statement, there should be an adjustment for both the buyer and the seller for the RE taxes already paid by the seller. The seller gets a credit for the prorated amount of the year (using an 8/1 closing 5/12s of the annual total) and you as buyer get charged for that amount. You have therefore paid the RE taxes through the closing settlement and can deduct that amount on your Schedule A. I'll let someone else address the points.
pshonore
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Re: New Home Owner - Tax Questions

Post by pshonore »

Usually origination charge = points; however since your company paid them, you probably cannot deduct them. Did they include anything they paid on your W2?

Taxes paid to your escrow agent are not deductible until they pay the taxing authority. However, someone probably reimbursed the seller for the taxes he "pre-paid" from the date of closing thru 12/31. You can deduct those if you paid them at closing (and were not reimbursed by your company.
sscritic
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Re: New Home Owner - Tax Questions

Post by sscritic »

My county's fiscal year is July 1 to June 30, although in this case I don't think it matters. If the seller had paid 6 months worth on July 1, that covers until 12/31. Of course, we are both assuming that the February and July payments are equal and represent 6 months. That may not be the case, e.g., the July payment might be 7 months to get you to February and the February payment be 5 months to get you to July.
Topic Author
primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

HouseStark wrote:
primetime wrote: My 1098 reads $2692.79 in box 1, "Mortage Interest recieved from Payer/Borrower"
It has $1884.00 in box 2, "Points paid on purchase of principle residence"
In box 5, it says $0.00 for "real estate taxes"

No mention of personal property taxes paid on this form.

I contacted my county tax office and property taxes were due in Feb and July of 2013. I closed on my home in Aug of 2013. At closing, I put in 5 months worth of taxes into escrow. This is reflected in box 1005 on my HUD-1 statement.

1. For 2013, even though I put money in escrow, since the tax payments were made by the previous owner, I don't put in anything for personal property taxes paid for 2013, correct?
I think you mean real estate taxes, not personal property taxes. Personal property means things like cars and the battle droid I'm building in my garage, but never mind that. Since RE taxes are due in Feb and July, you are correct that they would have been paid by the previous owner before closing and likewise, there would be no RE taxes paid by you for the mortgage servicer to report on the 1098. However, if you look at your closing statement, there should be an adjustment for both the buyer and the seller for the RE taxes already paid by the seller. The seller gets a credit for the prorated amount of the year (using an 8/1 closing 5/12s of the annual total) and you as buyer get charged for that amount. You have therefore paid the RE taxes through the closing settlement and can deduct that amount on your Schedule A. I'll let someone else address the points.
My mistake, yes I meant RE taxes. On the settlement, it states that county property taxes from 1/1/13 to 8/28/13 was $1997.67. This is under "adjustments for items unpaid by seller" Then under "reserves deposited by lender" (my employer did not pay for the taxes) it states $1265.90 Taxes are $253.18 per month @ 5 months. So how much can I deduct?
Topic Author
primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

pshonore wrote:Usually origination charge = points; however since your company paid them, you probably cannot deduct them. Did they include anything they paid on your W2?

Taxes paid to your escrow agent are not deductible until they pay the taxing authority. However, someone probably reimbursed the seller for the taxes he "pre-paid" from the date of closing thru 12/31. You can deduct those if you paid them at closing (and were not reimbursed by your company.
On the W2, it looks like my employer simply added whatever they paid for closing costs on-top of my regular gross pay. Doesn't look like they did a "gross-up". There's nothing in box 12 on the W2 indicating any reimbursement.

Also this OLT software is messed up. I claimed my fiancee as a dependent and it's coming up with an incorrect total standard deduction figure when I figure it "non-itemized".

Number of Dependents 01
Number of Exemptions 02
Standard Deduction for Single $6100
Total Standard Deduction $6100

Also the software is saying WARNING: "You have overpaid SS tax withheld for Primary. If it is correct don't worry. Please double check the SS entered in W-2 or W-2PR Box."
Seeing as how the SS amount is 6.2% of the social security wages, I'm not sure what's causing that warning to come up lol.
Last edited by primetime on Fri Jan 24, 2014 3:38 pm, edited 1 time in total.
sscritic
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Re: New Home Owner - Tax Questions

Post by sscritic »

primetime wrote: On the settlement, it states that county property taxes from 1/1/13 to 8/28/13 was $1997.67. This is under "adjustments for items unpaid by seller"
This looks like the previous owner didn't pay any taxes for the year, not bothering with February or July which the seller should have paid. The county was presumably paid at closing for those unpaid property taxes, but that has nothing to do with you. That would have been on the seller's side of the closing, not yours (I think).
HouseStark
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Re: New Home Owner - Tax Questions

Post by HouseStark »

primetime wrote: My mistake, yes I meant RE taxes. On the settlement, it states that county property taxes from 1/1/13 to 8/28/13 was $1997.67. This is under "adjustments for items unpaid by seller" Then under "reserves deposited by lender" (my employer did not pay for the taxes) it states $1265.90 Taxes are $253.18 per month @ 5 months. So how much can I deduct?
Okay, the closing statement says the RE taxes to date were UNPAID by the seller. That means they were charged against the seller's proceeds at closing. Do you not know what your annual RE taxes are for your new home? You really ought to know that sort of thing. Is there a county website where you can access such information? The "reserves deposited by lender" refers to money going into your escrow account. It is NOT RE taxes paid. Are you sure there is no closing adjustment in the buyer's column for RE taxes due from 8/29-12/31/13. It seems like there would be. In any case, you could do the math and come up with the prorated amount of RE taxes for the 8/29/12/31 period based on the amount for the full year. Do you understand why you can't claim the amounts being paid in escrow (reserves)? That money is not being paid the taxing authority (yet). It's still your money, it's just sitting in an account controlled by the escrow agent (the mortgage servicer) until they make the actual payment for RE taxes for the Feb and July due dates. So, you can't deduct money paid into escrow, you haven't actually paid any expense at that time.
pshonore
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Re: New Home Owner - Tax Questions

Post by pshonore »

primetime wrote: this OLT software is messed up. I claimed my fiancee as a dependent and it's coming up with an incorrect total standard deduction figure when I figure it "non-itemized".

Number of Dependents 01
Number of Exemptions 02
Standard Deduction for Single $6100
Total Standard Deduction $6100
Sounds right to me. Claiming your fiancee as a dependent does not change your standard deduction; it will give you an additional Personal exemption worth $3900 when taxable income is calculated.
Topic Author
primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

HouseStark wrote:
primetime wrote: My mistake, yes I meant RE taxes. On the settlement, it states that county property taxes from 1/1/13 to 8/28/13 was $1997.67. This is under "adjustments for items unpaid by seller" Then under "reserves deposited by lender" (my employer did not pay for the taxes) it states $1265.90 Taxes are $253.18 per month @ 5 months. So how much can I deduct?
Okay, the closing statement says the RE taxes to date were UNPAID by the seller. That means they were charged against the seller's proceeds at closing. Do you not know what your annual RE taxes are for your new home? You really ought to know that sort of thing. Is there a county website where you can access such information? The "reserves deposited by lender" refers to money going into your escrow account. It is NOT RE taxes paid. Are you sure there is no closing adjustment in the buyer's column for RE taxes due from 8/29-12/31/13. It seems like there would be. In any case, you could do the math and come up with the prorated amount of RE taxes for the 8/29/12/31 period based on the amount for the full year. Do you understand why you can't claim the amounts being paid in escrow (reserves)? That money is not being paid the taxing authority (yet). It's still your money, it's just sitting in an account controlled by the escrow agent (the mortgage servicer) until they make the actual payment for RE taxes for the Feb and July due dates. So, you can't deduct money paid into escrow, you haven't actually paid any expense at that time.
I know what my annual RE taxes are. There is a county website where the information is kept.

Property summary on the auditor site states:
First half: $1,515.80
Second half: $1,515.80
Delinquent: $0
Amount due $3,031.60

So regardless of what I put in escrow, it's $252.63 per month and $252.63*5= $1263.17
HouseStark
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Re: New Home Owner - Tax Questions

Post by HouseStark »

primetime wrote: So regardless of what I put in escrow, it's $252.63 per month and $252.63*5= $1263.17
Sounds, right. I think it's a coincidence that they also collect five months of reserves.
pshonore
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Re: New Home Owner - Tax Questions

Post by pshonore »

If you bought on Aug 29, you owned it for just a little over 4 months (assuming the tax year runs from 1/1 - 12/31 and that depends entirely on "local custom"). 0r 125/365 X annual tax
HouseStark
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Re: New Home Owner - Tax Questions

Post by HouseStark »

Damn math! Gets me every time.
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grabiner
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Re: New Home Owner - Tax Questions

Post by grabiner »

pshonore wrote:Usually origination charge = points; however since your company paid them, you probably cannot deduct them. Did they include anything they paid on your W2?
Origination charges and points are separate, and they are two different lines on the HUD-1. The origination charge is a fee, often about 1%, which you must pay to take out a mortgage; it is not a deductible expense. Points are considered interest, and can be deducted as interest on your tax forml; typically, you can choose various combinations of points and interest rate.

If your employer reimburses closing costs, it probably doesn't reimburse points, as points are not a necessary part of closing.
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pshonore
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Re: New Home Owner - Tax Questions

Post by pshonore »

grabiner wrote:
pshonore wrote:Usually origination charge = points; however since your company paid them, you probably cannot deduct them. Did they include anything they paid on your W2?
Origination charges and points are separate, and they are two different lines on the HUD-1. The origination charge is a fee, often about 1%, which you must pay to take out a mortgage; it is not a deductible expense. Points are considered interest, and can be deducted as interest on your tax forml; typically, you can choose various combinations of points and interest rate.

If your employer reimburses closing costs, it probably doesn't reimburse points, as points are not a necessary part of closing.
Here's what Pub 17 says:
The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points.
From http://www.standard.net/stories/2013/07 ... deductible
To report deductible points when they are not listed on the 1098 Mortgage Statement, it is necessary to look on the Settlement Statement issued by the title company when you signed for the home loan. Lines 801 and 802 on the Settlement Statement will show the amount of points or origination fees paid at the time you purchased the home.

In order for these fees to be fully deductible in the year purchased, the following conditions must be true:

* The loan is secured by the taxpayer's main home.

* Paying points is an established business practice in the area.

* The points paid were not more than the points generally charged in that area.

* The taxpayer uses the cash method of accounting, which is normally the case.

* The points were not paid in place of separately stated items such as appraisal fees, inspection fees, title fees, attorney fees and property taxes.

* The funds the taxpayer paid at closing, plus any seller paid points, were at least as much as the points charged. The funds paid can include a down payment, an escrow deposit and earnest money.

* The loan is used to buy or build the taxpayer's main home, not a second home.

* The points were computed as a percentage of the principal amount of the mortgage.

* The points are clearly shown on the Settlement Statement as points charged for the mortgage.

If the seller paid the points on the home, the points are treated as having been paid by the buyer making these deductible.
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primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

There's nowhere on the HUD that says points were used, just the origination fee. I was told by the loan officer for my mortgage that since the points and interest are listed on the 1098 form, I can deduct both on my taxes.

As far as the RE taxes are concerned, since the money is still in escrow account and payment for RE taxes isn't due until Feb 2014, I don't see how I can deduct Aug 29th-Dec 31st 2013 taxes when the funds haven't transferred from my escrow to the county.
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Re: New Home Owner - Tax Questions

Post by pshonore »

Unless local custon is very different where you live, they were taken and paid from your funds at closing by the closing agent (and should be on the HUD-1 as a separate line item)
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primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

pshonore wrote:Unless local custon is very different where you live, they were taken and paid from your funds at closing by the closing agent (and should be on the HUD-1 as a separate line item)
Any idea what the line # on the HUD would be to reflect this?
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Re: New Home Owner - Tax Questions

Post by sscritic »

Adjustments for items paid by seller in advance
106 City/Town taxes (buyer)
406 City/Town taxes (seller)
107 County taxes (buyer)
407 County taxes (seller)
Adjustments for items unpaid by seller
210 510 211 511 (yada yada)

Mine had dates attached.
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Re: New Home Owner - Tax Questions

Post by sscritic »

So what we have is a 1/1 to 12/31 year, with the first payment due in Feb and the second in July. The seller made neither payment, which is why the amount unpaid was [(365 - 125) / 365] x $3,031.60 = $1,993.38 (if they split the closing day, I get $1,997.53; if the seller pays the closing day, I get $2,001.69).

You should have paid the rest of the July payment or the [125 / 365] x $3,031.60 = $1,038.22. It should be on your settlement statement as well as the HUD-1. This is separate from any escrowed amounts, which are destined for your February payment.
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primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

Lines 106, 107, 406, 407, 210 and 510 are blank.
$1997.67 shows up in lines 211 and 511 for Jan to Aug.
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primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

It appears as if the taxes due from 1/1/13 to 8/28/13 was subtracted from the total closing costs due. Looks like I'm getting the tax proration because the sellers paid for the time they lived in the house for that tax period.
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Re: New Home Owner - Tax Questions

Post by sscritic »

You said it was under unpaid. They didn't pay before the closing. The county, as a creditor, just as the mortgage holder as a creditor, got paid out of the money you forked over, but you didn't pay it as it came out of the seller's funds.

That leaves unresolved the issue of whether you have or have not paid the taxes for the period of time for which you have been the owner, 8/29 to 12/31.

You gave the lender the money (HUD 1005) but the lender didn't pay the city (my HUD-1 had property taxes deposited on line 1004). Ask your lender where the money went and why your taxes for 8/29 to 12/31 weren't paid yet.
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primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

sscritic wrote:You said it was under unpaid. They didn't pay before the closing. The county, as a creditor, just as the mortgage holder as a creditor, got paid out of the money you forked over, but you didn't pay it as it came out of the seller's funds.

That leaves unresolved the issue of whether you have or have not paid the taxes for the period of time for which you have been the owner, 8/29 to 12/31.

You gave the lender the money (HUD 1005) but the lender didn't pay the city (my HUD-1 had property taxes deposited on line 1004). Ask your lender where the money went and why your taxes for 8/29 to 12/31 weren't paid yet.
My mistake, yes you are correct the $1997.67 was listed on lines 211 and 511.

I'll ask my lender on Monday why the taxes weren't paid yet. My escrow balance is $2145.45 so it doesn't look like it was paid. Per the county website, it says first half due 2/26/14 and 2nd half TBD. If the taxes aren't due to the county until 2/26/14, and my lender waits until then to pay them, then I guess It doesn't matter since I can deduct RE taxes for 2013 even if they aren't due until 2014.
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Re: New Home Owner - Tax Questions

Post by pshonore »

Your escrow balance would normally be used to pay the February 2014 bill representing taxes due for the period 1/1/14 - 6/30/14. Right now it sounds like you have about 9 months in escrow (5 paid at closing + 1 each with your Oct,Nov,Dec and Jan mortgage payments. (The servicer likes to keep a little in reserve, unless you're also escrowing Homeowners insurance??). Can you look on the County website and see if there's an oustanding balance? Or ask the closing Agent if a payment representing taxes from the end of August through 12/31 was made? That should be the amount you can take as a property tax deduction.
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primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

pshonore wrote:Your escrow balance would normally be used to pay the February 2014 bill representing taxes due for the period 1/1/14 - 6/30/14. Right now it sounds like you have about 9 months in escrow (5 paid at closing + 1 each with your Oct,Nov,Dec and Jan mortgage payments. (The servicer likes to keep a little in reserve, unless you're also escrowing Homeowners insurance??). Can you look on the County website and see if there's an oustanding balance? Or ask the closing Agent if a payment representing taxes from the end of August through 12/31 was made? That should be the amount you can take as a property tax deduction.
I was told by the county that taxes from 1/1/13 - 6/30/13 are to be paid on 2/26/14. The amount is $1515.80, and it will come out of my escrow and paid to the county.

When I purchased the home, taxes due from 1/1/31 - 8/28/13 is listed on lines 511 and 211 as $1997.67 and this amount was subtracted from my total closing costs due, so I know I didn't pay it out of pocket. All I did was put 5 months of taxes into escrow.

My 1098 form shows $0 in box 5 for Real Estate Taxes.

-County is saying that since the taxes won't be paid until 2/26/14, I can't deduct them on my 2013 return.
-A rep on olt.com told me that 8/29/13 - 12/31/13 can be deducted on 2013 return.

Which one is it lol?!
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Re: New Home Owner - Tax Questions

Post by sscritic »

primetime wrote: I was told by the county that taxes from 1/1/13 - 6/30/13 are to be paid on 2/26/14. The amount is $1515.80, and it will come out of my escrow and paid to the county.

When I purchased the home, taxes due from 1/1/31 - 8/28/13 is listed on lines 511 and 211 as $1997.67 and this amount was subtracted from my total closing costs due, so I know I didn't pay it out of pocket. All I did was put 5 months of taxes into escrow.
So your county collect taxes a year after the fact. That seems strange to me. What also is strange is that the same $1997.67 showed up on both sides of the ledger.

You need to do some adding and subtracting. When I closed, I got a closing statement separate from the HUD-1. It was all about me. One column was debits, the other credits. The first item on the debit side was the price I had agreed to pay for the house. The first several items on the credit side were my deposit, down payment, and loan amount. The only things listed on both side were items that I bought but the seller paid for, e.g., owner's title policy and transfer tax (where I live, seller pays is the custom). Everything else was a debit, including taxes already paid by the seller for the part of the tax year I would own the house (the tax year starts on July 1 and I bought in the spring) which I paid back at the closing. Those taxes were deducted on my income tax return because I paid them for a house that I owned (for the same period of time). At the very bottom, the credits and debits added to the same amount.

If you didn't get such a closing statement, you should make your own. Everything has to add up. Once you have that, you will see if you paid taxes for the period of time that you owned the house.
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primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

sscritic wrote:
primetime wrote: I was told by the county that taxes from 1/1/13 - 6/30/13 are to be paid on 2/26/14. The amount is $1515.80, and it will come out of my escrow and paid to the county.

When I purchased the home, taxes due from 1/1/31 - 8/28/13 is listed on lines 511 and 211 as $1997.67 and this amount was subtracted from my total closing costs due, so I know I didn't pay it out of pocket. All I did was put 5 months of taxes into escrow.
So your county collect taxes a year after the fact. That seems strange to me. What also is strange is that the same $1997.67 showed up on both sides of the ledger.

You need to do some adding and subtracting. When I closed, I got a closing statement separate from the HUD-1. It was all about me. One column was debits, the other credits. The first item on the debit side was the price I had agreed to pay for the house. The first several items on the credit side were my deposit, down payment, and loan amount. The only things listed on both side were items that I bought but the seller paid for, e.g., owner's title policy and transfer tax (where I live, seller pays is the custom). Everything else was a debit, including taxes already paid by the seller for the part of the tax year I would own the house (the tax year starts on July 1 and I bought in the spring) which I paid back at the closing. Those taxes were deducted on my income tax return because I paid them for a house that I owned (for the same period of time). At the very bottom, the credits and debits added to the same amount.

If you didn't get such a closing statement, you should make your own. Everything has to add up. Once you have that, you will see if you paid taxes for the period of time that you owned the house.
I have something similar that I made in M$ excel. No taxes were paid by me at closing, only the 5 months put into escrow.
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primetime
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Re: New Home Owner - Tax Questions

Post by primetime »

As of right now, the lender nor I have paid the county for taxes due in 2013 because the first half of 2013 isnt due until Feb 2014, and the 2nd half of 2013 isn't due until July 2014. The seller basically gave me $1997.67 at closing for taxes for the 1/1/13 - 8/28/13 period. He will claim this on his 2013 tax return (or at least he should).

Come time to file my 2014 return, I will have paid once in Feb and once July of 2014, for taxes that were due for all of 2013, since 1/1/13 - 6/30/13 gets paid to county on Feb 14, and 7/1/13 - 12/31/13 get's paid in July 2014. The total amout paid from my escrow account to the county come time to file in 2014 will have been $3,031.60. Since I was given $1997.67 at closing, the amout I am eligable to claim on my 2014 tax return is $3031.60 - $1997.67 = $1033.93

No real estate taxes can be claimed on my 2013 return.
$1033.93 can be claimed on my 2014 return (assuming the lender does infact make the payments on Feb and July of 2014)

I was told this by two different H&R Block tax advisors.

Does this sound right?
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grabiner
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Re: New Home Owner - Tax Questions

Post by grabiner »

pshonore wrote:
grabiner wrote:
pshonore wrote:Usually origination charge = points; however since your company paid them, you probably cannot deduct them. Did they include anything they paid on your W2?
Origination charges and points are separate, and they are two different lines on the HUD-1. The origination charge is a fee, often about 1%, which you must pay to take out a mortgage; it is not a deductible expense. Points are considered interest, and can be deducted as interest on your tax forml; typically, you can choose various combinations of points and interest rate.

If your employer reimburses closing costs, it probably doesn't reimburse points, as points are not a necessary part of closing.
Here's what Pub 17 says:
The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points.
From http://www.standard.net/stories/2013/07 ... deductible
To report deductible points when they are not listed on the 1098 Mortgage Statement, it is necessary to look on the Settlement Statement issued by the title company when you signed for the home loan. Lines 801 and 802 on the Settlement Statement will show the amount of points or origination fees paid at the time you purchased the home.
This can go either way. I just got my 1098, and what is called "points" on the form includes all of line 802 and all but $65 of line 801. I believe PenFed has a single fee on line 801 which covers the 1% loan origination fee and another $65 which may be an application fee; line 802 would be zero for the highest rate and is very high on my mortgage because I paid 2.75 points to get a lower rate.
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