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state or fed tax deduction for property purchase? - dirk1609 - 03-08-2009
We bought the property next to us late last year and need to know if there are any deductions for state or federal taxes? Nothing popped up on turbo tax.
Thanks
RE: state or fed tax deduction for property purchase? - missydog1 - 03-08-2009
You can deduct your property tax. I assume you're talking about vacant land?
You can't deduct the finance costs and interest or points, I'm pretty sure.
Turbo Tax has it ... we pay property tax on a vacant parcel. You just add all your property tax together, IIRC.
The federal deductions get transferred over to the state automatically.
RE: state or fed tax deduction for property purchase? - dirk1609 - 03-08-2009
I kinda figured that we missed out on the points and intrest deductions. We put the entire purchase on our Starwood American Express. With a 0% intrest transfer and 21,000 SPG points (hotel points) it was too good to mess with the bank.
RE: state or fed tax deduction for property purchase? - John S. Rabi - 03-08-2009
Since it's an investment property, all your expenses are tax deductible.
Aloha,
John S. Rabi, GM,ARB,BFT,CM,CBR,FHS,PB,RB
808.989.1314
http://www.JohnRabi.com
Typically Tropical Properties
"The Next Level of Service!"
RE: state or fed tax deduction for property purchase? - missydog1 - 03-09-2009
I should have mentioned the investment property angle. If it is to be an investment and not part of your primary residence, that's the better way to go.
There is an IRS provision that if you have an adjacent parcel that you use as part of your primary residence, built on or not, that if you sell both you can use your homeowner's exclusion to avoid capital gains. The second parcel has to sell within two years of the home.
If you claim it as an investment property then you wouldn't be able to do that, and would pay tax on any capital gains. That's why we chose not to claim anything but property taxes on ours. That and we got our maximum refund the year we bought it because of the points and interest on the house purchase.
If you don't think you will sell or if you plan to have a rental or something on it, it sounds like treating it as investment property is the way to go.
Disclaimer - John Rabi is the one who knows about the investment deductions. I've never claimed them and it's been three years since I read the rules on them.
RE: state or fed tax deduction for property purchase? - dirk1609 - 03-10-2009
Ok, thank you both for the info. After getting your answers and digging through Turbo Tax, here's a more specific question. I'm assuming now that the closing costs and fees (at least some of them) are deductable if the property is an investment property. Which fees are deductable and in what section of the form do I list those deductions? I've scoured Turbo Tax and cannot find it anywhere. I did find where to list the interest for the land, but not the closing fees. Here are the specific fees I'm asking about:
Escrow Fee
ALTA Std Owner Policy
Record Deed
Credit Card fee (we put the property on a credit card)
Balance trasfer fees (a long shot I know, but we transfered the land purchase balance from an interest bearing CC to a no-interest CC)
Thank you so much for helping me out. I'm completely in the dark with this tax stuff and I really appreciate any help.
RE: state or fed tax deduction for property purchase? - EightFingers - 03-10-2009
I was getting ready to type all sorts of stuff and then I decided just to say: "Talk to a CPA."
I own rental property as well as other "investment property" and it can get complicated.
RE: state or fed tax deduction for property purchase? - John S. Rabi - 03-10-2009
I know about investment properties, I know about tax deductions, but I don't know anything about Turbo Tax. [
]PS. I pay big bucks to a CPA in Nevada to do my taxes. Why Nevada?! I couldn't find anyone knowledgeable enough here.
Aloha,
John S. Rabi, GM,ARB,BFT,CM,CBR,FHS,PB,RB
808.989.1314
http://www.JohnRabi.com
Typically Tropical Properties
"The Next Level of Service!"
RE: state or fed tax deduction for property purchase? - missydog1 - 03-10-2009
dirk, Turbo Tax will not help you with Tax Law questions.
Instead, if you're a do-it-yourself person like me, go to www.irs.gov and search Investment Property, and find the right publication. The publication will tell you what line of the 1040 this deduction goes on, and what you can deduct.
TurboTax is great because it coordinates all the information and automatically recomputes everything when you make a change, but it doesn't cover all tax situations.
Also, are you using TT Premier? The Basic and Deluxe don't handle rentals and may not do investment properties. The Premier also handles depreciation and amortization, and has all the schedules programmed in.
Hope this helps. This year we didn't have a rental, so I only bought the Deluxe, or I'd take a look at my Turbo Tax to see if I could find it.
So far I've been able to avoid using a CPA, as long as I have enough reading comprehension that I can read and comprehend the tax publications. I had one question this year where I couldn't find the answer in an IRS publication, and I called the IRS, and they answered it. For free.
ETA but if I had as many investments as John, I sure would use a CPA because I am not that organized ... [
]
RE: state or fed tax deduction for property purchase? - dirk1609 - 03-11-2009
Thank you for the IRS link KathyH. I don't have Premier, I have Deluxe. I guess that explains why I can't find what I'm looking for. I've never needed anything more than Deluxe before because I really don't have any other investments (other than an IRA), and my taxes aren't usually that complicated. I definately don't have enough investments...or money for that matter...to hire a CPA. It's just this one small property purchase that's giving me a bit of grief. I'll definatley be rooting through the IRS website this week. I'm sure I'll find what I need there.
Thanks so much to all!