My fiance and I bought a home in February. Who claims the mortgage interest/property taxes?
Home Mortgage
lynndh5 asked:
We live in New York State. The other issue is that I took money out of my IRA to pay the down payment and closing costs. Does that mean I need to claim it to not get penalized? Any help would be great!
Joan
We live in New York State. The other issue is that I took money out of my IRA to pay the down payment and closing costs. Does that mean I need to claim it to not get penalized? Any help would be great!
Joan
July 10th, 2009 at 2:32 am
Katherine
It would be worth your time and money to speak to a tax expert this year.
Yes, if you took money out of an IRA to buy a house, you better show where that money went or you’ll pay a penalty. With a traditional IRA, you’ll pay taxes on the money no matter what, but you want to try to avoid paying additional penalties. I thought you could only use a ROTH IRA for buying a house, but I could be wrong.
If both of your names are on the deed and both of your names are on the mortgage then I think either one of you can claim those expenses as long as nothing gets claimed twice.
July 13th, 2009 at 4:54 am
Ida
First, you will pay taxes on the IRA deduction, but most likely will not pay the penalty because you bought a home (check the IRS publication). Check with your plan’s administrator to see if taxes jave been paid on the withdrawal and whether you will get a 1099.
Second, teh mortgage interest will be claimed by you - it is your debt, no one else can claim it. You will get a statement sometime after January 1 with the amount of interest you can claim (a copy will also be sent to the IRS by the mortgage holder). Finally, if you paid the property taxes out of your escrow (which you probably did), you will claim the deduction. All of this should have been handled at clsoing with the pre-pays and credits.
Finally, some of the closing fees will probably be deductible. If you are having your taxes done by a professional (Block, Hewitt, etc.), bring your closing papers when you go tot meet with them.
All this, of course, assumes you are itemizing.
July 15th, 2009 at 4:46 pm
Bertha
Your closing statement will show how much you paid in taxes at settlement and you will probably get a 1099 from the lender.
You made a big, big mistake taking money from your IRA. Who in the world told you to do that.
If you are not 59 and 1/2 you will pay a 10% penalty. You will pay about 20% Federal tax and you will pay a New York State tax so your total taxes due on your distribution could range to 40% to 45%. A huge price to pay.
July 17th, 2009 at 2:30 pm
James
Given the quality of the answers, you definitely want to see a professional.
1. If you took out $10,000 or less to buy the house, then there is an exception to the IRA penalty by using form 5329.
2. You are to take the deductions for the interest and property taxes based on the degree to which you own the property, had the debt and actually paid those expenses. The IRS instructions for schedule A discuss what to do when the 1098 is in just one name.
If you own the property 50-50 and paid 100% of the interest, you are stuck–you can only deduct 50% of the intereset (because you own 50%) and the other person can’t deduct anything (because they didn’t pay it).
July 19th, 2009 at 4:15 pm
Thomas
It should be split based upon whether it was 50/50 or 60/40 or whatever percentage was used. It usually is how the mortgage is split and how much each put down
As to the IRA, you need to show it on your tax return and use Form 5329 to avoid any 10 % penalty. You still have to show it as income.. Use code 9 to exclude the 10 percent penalty up to $10,000 in down payment.
If you are a first time homebuyer, you should attach IRS form 5405 and take the credit.
Good luck on home ownership. Just watch the escrow account . They adjust it each year. Mistakes have been made and can happen. Make sure they will be escrowing enough. Also check your statement once a year get a history statement on the mortgage so it will tie to IRS from 1098 they issue once a year