Note: the Mortgage Debt Cancellation Relief Act extends the PMI deduction for mortgage insurance premiums through tax year 2010.
Note: "A homeowner cannot deduct maintenance expenses, nor can he take depreciation deductions on his personal residence," states the "Realty Bluebook," 30th Ed., Dearborn Financial Publishing, Chicago; 1993.
In order to benefit from the deduction you cannot simply take the standard deductions offered by the IRS - you must itemize deductions. Your total itemized deductions must, therefore, exceed the IRS's standard deductions in order to realize any savings.
Another point to remember is that the amount of interest on your loan goes down each year you pay on your mortgage (all standard home-loan formulas pay off interest first before significantly paying into principal). That's why paying extra on your principal every year can help you pay off your loan early.
Seek the advice of the IRS or tax advisor before applying the mortgage interest deduction.
Cost basis is a tax term for the dollar amount assigned to a property at the time it is acquired, for the purpose of determining gain or loss when it is sold. For example, one of the three siblings sold his or her share of a property to be divided equally, he or she must pay capital gains tax for whatever profit made over one-third of the new basis. Other tax consequences include estate taxes.
However, the estate must total $675,000 or more for tax year 2001 before tax issues become a concern. The IRS allow residents to pass on property, cash and other assets worth up to a total of $675,000 for tax year 2001 before charging the heirs any taxes. This figure will rise each year for the next several years.
Regarding the transfer of ownership, quit-claim deeds often are used between family members in situations such as this when an heir is buying out the other. All parties must be agreeable to dropping a name from the title.
For more information, consult the IRS's Publication 950, "Federal Estate and Gift Taxes." Order by calling 1-800-TAX-FORM.