Announcement

Collapse
No announcement yet.

capitalizing property taxes on a second home

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

    capitalizing property taxes on a second home

    If a taxpayer owns a second home but no longer itemizes deductions and wants to capitalize property taxes, adding them to his property's basis - assuming it's allowed, how is this best handled ?

    Does some form of election statement go to IRS - in addition to the e-filed return ?

    TTB page 4-14 seems to address this situation but doesn't seem to provide the mechanics.

    Thanks

    #2
    Looking at TTB 4-14. It gives....

    Originally posted by RWG1950 View Post
    If a taxpayer owns a second home but no longer itemizes deductions and wants to capitalize property taxes, adding them to his property's basis - assuming it's allowed, how is this best handled ?

    Does some form of election statement go to IRS - in addition to the e-filed return ?

    TTB page 4-14 seems to address this situation but doesn't seem to provide the mechanics.

    Thanks
    If you are taking about "may elect to add interest and real estate taxes to the cost basis of unimproved land...."

    the reference TTB 4-14 at bottom of paragraph. "A statement listing the expenses capitalized must be attached to the original return for the year the election is made. The election is made on a year-by-year basis. (Reg. 1.266-1)"

    Excerpt TTB 4-14:
    Election to Capitalize Interest and*Taxes
    A taxpayer may elect to add interest and real estate taxes to the cost basis of unimproved land rather than claim a current deduction. This election might benefit the taxpayer in the following situations.

    Standard deduction. If a taxpayer claims the standard deduction, the deduction for interest and taxes is lost. The taxpayer will benefit from the election to capitalize the amounts, which will increase the basis of the property.
    AMT. If taxes reported on Schedule A would be added back to income as a preference item for AMT, the taxpayer may not realize a benefit from the deduction. In this case, the election to capitalize and add the amounts to basis would benefit the taxpayer.

    A statement listing the expenses capitalized must be attached to the original return for the year the election is made. The election is made on a year-by-year basis. (Reg. 1.266-1)
    Always cite your source for support to defend your opinion

    Comment


      #3
      Question about 2nd home

      Question about 2nd home, not unimproved land. Is it investment use or personal use?

      Comment

      Working...
      X