Settlement Statement HUD-1 Form Line Item(s) Question

[rcherpak]

For the borrower on a mortgage, are the following items deductible on Form 1040 Schedule A:

Property taxes lines 106, 107, and 109

Origination charge (points), line 801, and

Mortgage insurance premium, line 902

Also, will these items be included or excluded from the 1098 he/she receives at the end of the year?

Kindest Regards

[BP.]

The Tax Book, p. 6-2.

[taxea]

For the borrower on a mortgage, are the following items deductible on Form 1040 Schedule A:

Property taxes lines 106, 107, and 109

Origination charge (points), line 801, and

Mortgage insurance premium, line 902

Also, will these items be included or excluded from the 1098 he/she receives at the end of the year?

Kindest Regards

best place to find total prop tax paid is the assessors office. Client can contact them for the total amt paid for the year.

origination points are deductible as interest either over the course of the loan (if included in the mortgage) or deducted in full if paid in cash

mortgage insurance premium is deductible depending on original purchase date

Also, not necessarily

[kamckinley]

I have a similar question so I'm piggybacking on this thread instead of starting a new one...

When someone buys a house, they get to deduct the real estate taxes from the date they own the house through the end of the year, correct? So if they buy on Dec 1, they will pay and deduct the real estate taxes from 12/1-12/31.

What about if someone buys a house on Dec 1 and they pay the r/e taxes for the entire year? Not sure why this would happen but my client produced a paid r/e tax receipt for the full year's taxes even though they bought the house in December. Do they get to deduct the entire amount even though they only owned the house for one month? Looking at Publication 71 it looks like they can only deduct the taxes from the date they owned the house. Can anyone shed some light on this? The taxes were over $8,000 so I want to make sure I get it right, and that I can explain why the client can't deduct the taxes if it's not allowed.

Thanks!

[Bay ArEA]

Looking at Publication 71 it looks like they can only deduct the taxes from the date they owned the house. Can anyone shed some light on this? The taxes were over $8,000 so I want to make sure I get it right, and that I can explain why the client can't deduct the taxes if it's not allowed.

Thanks!

I had to read up on this one just the other day, and IRS pub 530 says “ You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. You each can deduct your own share, if you itemize deductions, for the year the property is sold. “

https://www.irs.gov/publications/p530/ar02.html#en_US_2015_publink100011838

[kamckinley]

Thank you, that helps a lot! Not sure why real estate taxes paid when a client buys and/or sells a house always confuses me, but this helped clear it up.

[taxea]

What if the house was a foreclosure or purchased directly from the bank and a requirement of the purchase was that the buyer pay back taxes owed?

[JohnH]

I have a similar question so I'm piggybacking on this thread instead of starting a new one...

When someone buys a house, they get to deduct the real estate taxes from the date they own the house through the end of the year, correct? So if they buy on Dec 1, they will pay and deduct the real estate taxes from 12/1-12/31.

What about if someone buys a house on Dec 1 and they pay the r/e taxes for the entire year? Not sure why this would happen but my client produced a paid r/e tax receipt for the full year's taxes even though they bought the house in December. Do they get to deduct the entire amount even though they only owned the house for one month? Looking at Publication 71 it looks like they can only deduct the taxes from the date they owned the house. Can anyone shed some light on this? The taxes were over $8,000 so I want to make sure I get it right, and that I can explain why the client can't deduct the taxes if it's not allowed.

Thanks!

This is why you have to look at the HUD-1. Oftentimes, the buyer will pay the entire tax bill at year-end. However, the HUD-1 will reflect a credit against the purchase price for the seller's pro-rata portion of the property taxes. So even though the buyer writes a check for the entire amount, back at closing they received a reduction in the total purchase price (purchase price plus closing costs), for the seller's portion of the taxes. Therefore, the buyer's tax deduction is limited to the portion of the year they owned the home in spite of the fact that they wrote the check for the full amount.

Conversely, the seller gets to deduct their pro-rata portion of the taxes even though they didn't write a check to anyone. I think an often-missed tax deduction is the seller's portion of property taxes because the only place this can be found is the HUD-1.