last-minute
real estate tax tips

Early spring's budding trees and blossoming flowers signal a warning alarm for the thousands of Americans who have waited until the last minute to file their federal tax returns. If you're one such "late bloomer", here are some real estate-related tax deductions and credits to mull as the Ides of April draw near.

Owners

Mortgage Interest - Most homeowners will be able to deduct all of their home mortgage interest for the year. For married couples filing jointly, mortgage interest is deductible for loans with of $1 million or less (the figure is $500,000 or less for those who are married and filing separately). In order to take a home mortgage interest deduction, the property must be either the primary home or a second home not used as a rental during the year.

Home Improvement Loan Interest - Interest on home improvement loans is deductible without a set dollar limit, provided that the money is used to finance "capital improvements" to the property. "Capital improvements" are those that add to the home's value, significantly prolong its life or adapt it to new uses.

Property Taxes - Property or "real estate" taxes are fully deductible from taxable income. City or state property tax refunds will reduce the federal deduction.

Home Office Deduction - If an area of the home is used exclusively for business purposes, one may be able to deduct home expenses related to that area.

Sellers

Capital Gains - Home sales have become a real tax haven since the inception of the Taxpayer Relief Act of 1997. Up to $250,000 (if single or a married couple filing separately) or $500,000 (if filing jointly) of profit of a home sale is tax-free if the home has been a primary residence for at least two of the last five years.

Moving Costs - If asked to are relocating to begin a new job, it may be possible to deduct some moving costs. Qualifying for these deductions can be complicated; but if the requirements are met one can deduct the cost of travel, storage or lodging.

Selling Costs and Capital Improvements - The amount of selling costs - including broker's commissions, legal fees, and inspection fees - can be deducted from the capital gain of the home sale. Decorating or repair costs can also be deducted if the work is done within 90 days of the sale and for the purpose of making the home more marketable.

Buyers

Points - The "points" charged by a mortgage provider for a new home purchase, which can easily total thousands of dollars, are fully deductible. Commission charged by the mortgage broker is not deductible.

Mortgage Tax Credit - A program called the Mortgage Credit Certificate (MCC) gives low-income first time homebuyers a tax credit of up to 20% of the interest payments made on the home. The credit is available each year the buyer keeps the loan and lives in the house purchased with the certificate. The remaining 80% of the interest can be taken as a mortgage interest deduction.

More Information

For more information on real estate-related income tax credits and deductions, visit the IRS website at www.irs.gov. Among the most useful documents:

* Publication 530: Tax Information for First-Time Homeowners
* Publication 523: Selling Your Home
* Publication 527: Moving Expenses
* Publication 587: Business Use of Your Home
* Publication 936: Home Mortgage Interest Deduction