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Straightforward and accessible, this comprehensive guide reveals a multitude of both well-known and little-known tax-saving ideas—from deductions for real estate taxes to pocketing tax-free mortgage proceeds when trading up to a more expensive home. Fully updated to reflect all the changes in today’s tax law, J.K. Lasser’s Homeowner’s Tax Breaks 2007 will help you make more informed decisions when dealing with this important issue.
About the Author
Gerald J. Robinson is an attorney at Carb, Luria, Cook & Kufeld, LLP. He holds an LLM in taxation from New York University.
Table of Contents
Part I: Sheltering Your Income with Home Deductions.
1. Deductions in Year You Buy Your Home.
1.2 Real Estate Taxes in the Year You Buy: Get Your Proper Share.
1.3 Mortgage Points: How to Assure Deduction.
1.4 Moving Expenses: Does Your Move Qualify for Deduction?
1.5 How Should Married Couples Take Title to Their Home?
1.6 Purchase Expenses: The Importance of Records.
1.7 Helping with the Down Payment: First-Time Homebuyer’s IRA Break.
1.8 Purchaser’s Tax-Planning Checklist.
2. Recurring Deductions Every Year You Own Your Home.
2.2 Planning to Maximize Deductions.
2.3 Deduct All Your Real Estate Taxes.
2.4 Tax Magic of Home Mortgages: Your Interest Deductions.
2.5 Refinanced Home Mortgage—Watch Out for Interest Deduction and Points.
2.6 Home Damaged? Let the IRS Help Pay!
2.7 How to Boost Your Damage Loss Deduction.
2.8 When Your Damage Is from a Presidentially Declared Disaster.
2.9 How to Deduct Your Home Office Expenses.
2.10 Eligibility of Employees.
2.11 Eligibility of Business Owners.
2.12 Figuring the Deduction.
2.13 If You Work outside Your Home: How to Get Home Office Deductions.
2.14 How Home Office Makes Commuting Costs Deductible.
2.15 Deduct Your Home Office Equipment Cost—Up Front.
3. Special-Situation Deductions for Homeowners.
3.2 How to Get Tax-Free Income from Short-Term Rental.
3.3 How to Make Your Credit Card and Car Loan Interest Deductible.
3.4 How to Deduct Cost of Medical Home Improvements.
3.5 Deductible Home Improvements for the Disabled.
3.6 How an Employee Gets a Tax Break for a “Sideline” Business.
3.7 Deduction of Fees for Home Tax Advice.
3.8 Tax-Wise Borrowing against Your Home for Business.
3.9 Renting a Part of Your Home.
3.10 Renting Your Entire Home.
3.11 Your Home as a Retirement Nest Egg.
3.12 Battling Condo or Co-op Board.
3.13 Suing the Builder: Tax-Free Proceeds.
Part II: Tax Shelter When You Sell Your Home.
4. How to Sell Your Home with No Tax on Gain.
4.2 How to Plan for the Sale.
4.3 Exclusion of Up to $250,000 or More of Gain.
4.4 How to Qualify for the Exclusion.
4.5 Exceptions to the Two-Year Rule: Job Change, Health Problems, or Unforeseen Circumstances.
4.6 Married Couples: How to Get the $500,000 Exclusion.
4.7 Is Your Home Your “Principal Residence”?
4.8 Your Home Office: Does It Qualify?
4.9 Vacant Land Can Qualify.
4.10 Snowbirds: How to Deal with the Southern Home Trap.
4.11 Gain in Excess of the Exclusion.
4.12 Member of Uniformed Service or Foreign Service.
4.13 How to Cope with a Depressed Market by Rental before Sale.
4.14 How to Avoid Reporting to the IRS.
4.15 Seller’s Tax-Planning Checklist.
4.16 Checklists for Qualification for $250,000/$500,000 Exclusion.
5. The High-Priced Home: How to Avoid Tax When Gain Will Exceed the $250,000 or $500,000 Ceiling.
5.2 Upper-Middle-Class Victims.
5.3 Tax Time Bomb.
5.4 Tax Idea 1: Deferred Sale Approach.
5.5 Tax Idea 2: The Leasehold Carve-Out.
5.6 Tax Idea 3: The Installment Sale.
5.7 Tax Idea 4: Conversion to Rental and Exchange.
5.8 Tax Idea 5: Exchange Home Used Partly for Business for Another Home Used Partly for Business.
5.9 Summing Up.
6. When Spouses Split.
6.2 Don’t Lose the Exclusion on Principal Residence Sale!
6.3 Transfer of Home to Spouse.
6.4 Is It Smart to Sell Prior to Divorce?
6.5 How to Avoid Gain on a Vacation Home.
6.6 Splitting Up Marital Property: Beware the Tax Trap.
Part III: Tax Shelter from Homeowner Loopholes and Vacation Homes.
7. Little-Known Loopholes Can Provide Big Savings.
7.2 The Super Loophole: How to Use Home Sale Exclusion to Shield Gain on Other Real Estate from Tax.
7.3 How to Buy a Vacation Home with Tax-Free Dollars from Sale of Rental Property.
7.4 Avoiding Tax When Your Land Includes Both House and Investment Property.
7.5 Your Appreciated Residence Is a Tax Treasure: How to Trade Up and Get Tax-Free Cash.
7.6 Home Improvements: Handyman’s Special Tax Shelter.
7.7 Home Improvement Business: Tax-Free Income for Renovators.
7.8 When a House Is Not a Home—How to Deduct Loss on Sale of Home.
7.9 How to Get a Charitable Deduction for Your Home—And Still Live in It.
7.10 Every Homeowner’s Hidden Loophole: Nontaxable “Imputed” Income.
8. Your Vacation Home Is a Tax Shelter.
8.2 Scenario 1: Use of Vacation Home Exclusively as Vacation Home.
8.3 Scenario 2: Use for Vacation and Rent for 14 Days or Less.
8.4 Scenario 3: Use for Vacation and Rent for More Than 14 Days.
8.5 Tax Loss from Rental Not Allowed.
8.6 Figuring the Amount Deductible.
8.7 Scenario 4: Rent to Others for the Entire Year.
8.8 Need for Profit Motive.
8.9 Figuring Amount of Tax Shelter.
8.10 Hidden Nugget: A Little Personal Use.
8.11 Depreciation: The Deduction without Cash Outlay.
8.12 Tax Shelter Rules.
Part IV: Retirement Benefits and Estate Planning.
9. How to Get Tax-Free Dollars in Retirement from Your Home.
9.2 Tax-Free Trading Down.
9.3 How Trading Down Increases Cash Flow.
9.4 How Much Cash from Trading Down?
9.5 The Tax Benefit.
9.6 Tax-Free Reverse Mortgages.
9.7 What Is a Reverse Mortgage, Anyway?
9.8 The Tax Benefit.
9.9 How Much Cash Flow Can You Get?
9.10 What Type of Reverse Mortgage Is Best for You?
10. Reducing Estate Tax on Home.
10.2 Should Spouses Own Home Jointly?
10.3 Do You Need Estate Tax Planning?
10.4 Larger Estates: How Not to Lose the Second Exemption.
10.5 How Parent Can Cut Taxes on Vacation Home.
10.6 Estate Planning for a Parent’s Home: Using Sale–Leaseback to Shift Appreciation in Value.
10.7 How Parents Can Escape Estate Tax on Their Homes: The Qualified Personal Residence Trust.
Appendix A. Instructions for Form 8829.
Appendix B. IRS Publication 521: Moving Expenses.
Appendix C. IRS Publication 530: Tax Information for First-Time Homeowners.