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By Tara-Nicholle Nelson | Broker in San Francisco, CA

9 Documents That Help You Reap Real Estate Tax Breaks

Technically speaking, April 15th is tax day. But for Americans who expect a refund - including many homeowners who want to cash in on real estate-related tax perks - filing sooner holds the promise of getting that check in hand, stat.

If you count yourself in that number, here’s a handy guide for 9 pieces of paper you should be sure to round up as you prepare to file, in order to reap every penny of the tax rewards you’ve earned by virtue of owning a home.

  1. Mortgage Interest Statement - IRS Form 1098. The meatiest real estate tax deduction on the books is the one that allows you to deduct 100 percent of the mortgage interest you paid in a year - including prepaid interest or points you might have paid at close of escrow, if you bought a home last year. By now, you should have received in the mail a Form 1098 from your mortgage lender that reports how much that interest totaled up to in 2011.  If you itemize your taxes and claim a mortgage interest deduction, you must include this form with your tax form when you file.
(If you haven’t received yours yet, most lenders that have online account management services also post the form digitally in your secure account on the web. Just login like you would to make your monthly payment, and look for a notice that says you can now download your 2011 Form 1098.)

  1. Property Tax Statements.  In addition to deducting your mortgage interest, if you own a home you are eligible to deduct the property taxes you pay to your local city, county and/or state.  You are not allowed to deduct some of the other miscellaneous expenses that some localities bundle up with the taxes they collect, like waste management and local assessments for things like street lighting, libraries and sidewalk construction.  To get this deduction right, the best practice is to have your property tax statements at hand and make sure you’re only deducting what’s allowed.
If you bought your home this year, it’s highly possible that you might not even have received a property tax statement yet - if that’s the case, look to #3, below.
  1. Uniform Settlement Statement (HUD-1).  If you bought or sold a home last year, right after closing you should have received a form called the HUD-1 Settlement Statement (hint: it’s usually on legal-sized paper and contains an accounting of credits and debits for you and your home’s buyer or seller). That form documents a number of line items which might help you out at tax time, including prepaid interest, the prorated property taxes you paid at closing, and closing costs like original fees and discount points. Some states offer tax credits for buying a foreclosure; check with your tax pro to find out if any such credits apply to you. If so, this statement might be your ticket to lower taxes.
And here’s another handy hint - if you can’t find your copy, you might have gotten it on a disk - and you can always email your real estate or escrow agent for a copy, as well.
  1. Moving Expense Receipts.  Moving expenses are tax deductible, if your move is closely related, both in time and in place, to the start of work at a new or changed job location and you meet the IRS’ time and distance tests. Long story short, your new home must be at least 50 miles farther from your new workplace than your old home was from your prior place of work, and you must work essentially full-time. So, if you bought or sold a home and moved in 2011, you’ll need to include receipts from expenses you incurred making the move (meals not included) in your tax prep paperwork.
  1. Cancellation of Debt Statement - IRS Form 1099. Homeowners who lost a home to foreclosure, or divested of one by negotiating a short sale or deed in lieu of foreclosure with their lender might receive some version of Form 1099 from their lenders, charging them with income in the amount of the mortgage debt that has been cancelled. You see, if you borrow money from someone, then they cancel the debt, that money you originally borrowed becomes income in the eyes of the IRS - and income is, as you know, taxable.

  1. Utility statements for home office.  For the average everyday homeowner who works at their employer’s place of business, utilities are not deductible (sorry!). But if there is a part of your home that is “regularly and exclusively” used for business, you might be able to claim that portion of your home as a home office, and deduct some portion of your home utilities and costs of painting and repairs, as a result.Talk with your tax provider about what expenses are allowable to be claimed under your home office deduction, and whether or not you should take it.
  1. Income and Expense statements from rental properties.  Some of you have elevated the art of home ownership to a business!  If you are a landlord, your tax situation is more complicated than that of the average bear; you’ll need to have complete income and expense statements when you put your tax returns together. It might actually behoove you to consult with a tax professional to make sure you are appropriately depreciating the property over time and not taking deductions that will expose you to the risk of audits, as well as to begin cultivating a long-term tax strategy for your real estate portfolio.
  1. Contractor receipts from energy efficient home improvements.  Under the Nonbusiness Energy Tax Credit, homeowners who have made improvements to their homes that fall within a list of energy efficient upgrades might be eligible to claim tax credits. If, during 2011, you installed energy efficient improvements such as insulation, new dual-paned windows and furnaces, you might be eligible for a tax credit of 10 percent of the cost of these upgrades, up to  $500 - only $200 of which may be used to offset the cost of windows.
  1. Mortgage Credit Certificate (MCC).  If you own a home you bought in the last few years using a Mortgage Credit Certificate issued by a local housing authority, that Certificate may entitle you to a pretty hefty tax credit, based on a percentage of the mortgage interest you paid - on top of your mortgage interest deduction. MCCs apply as long as you live in the home and have a mortgage on it, but they only apply to defray taxes you actually owe - you can’t use them to get a refund.  In any event, your mortgage credit certificate, if you have one, is a must-have document as you start putting your tax prep plan in play.
No matter what your tax situation is, if you own a home, it absolutely cannot hurt to get some professional help and advice to make sure you maximize your deductions, while minimizing your exposure to audit. And you should always consult with a tax attorney or certified public accountant regarding your tax liabilities and implications when you buy, sell, short sell or lose a home to foreclosure.

P.S. - You should follow Trulia and Tara on Facebook!


By Craig Schaid,  Thu Feb 2 2012, 08:03
Always great info Tara! Thank you!!
By Jolie Muss,  Thu Feb 2 2012, 08:41
Great info Tara! How about the same kind of tips for agents and brokers?
By Joyawilli,  Thu Feb 2 2012, 12:26
Excellent information Tara. I always forward it on to my friends and Real Estate connections on Twitter and Facebook. Thank you!
By Jon Lintvet,  Thu Feb 2 2012, 12:28
Enjoyed the read. It is important for folks to know there is a lot of hair on #5. The way this is written it is very misleading. Under a number of conditions the amount forgiven is NOT taxable. There are defined exemptions. I believe the legislation that defines this is called the mortgage debt relief act.
By Anni Zilz,  Thu Feb 2 2012, 12:57
Thanks Tara! A timely piece to send along with the HUD statements
By Hugh Lilly,  Thu Feb 2 2012, 13:19
In regards to the Debt Relief Act of 2007 you failed to mention that when doing a short sale or foreclosure that the tax payer can be exempt from paying taxes on the deficiency on their 1st mortgage on an owner occupied first mortgage purchase money loan. Senate Bill 401 in California brings California in line with the federal regulations. Please be aware the IRS Debt Relief Act of 2007 expires on December 31 st 2012. It is important to consult a CPA or Tax Attorney who is knowledgeable about short sales and foreclosures.
By Bernie Krause,  Thu Feb 2 2012, 13:24
REF: #5. The mortgage forgiveness debt relief act of 2007 is still in play until Dec. 2012,. That would eliminate the taxes owing on the mortgage amount that was cancelled by the lender. I hope they extend it or this Real Estate ride is going down again ,. And bankruptcy's will increase in 2013 .,
By Bernie Krause,  Thu Feb 2 2012, 13:27
Thank you Hugh ., You must have been typing the same time I was reading this ,. We definitely cannot have our Clients miss out on that ,.
By Theresa Gendron,  Thu Feb 2 2012, 13:32
Great info and comments. Thanks!
By Hugh Lilly,  Thu Feb 2 2012, 13:34
Thank you Bernie. As agents we need to alert our clients if they are thinking about short sale to act before it is too late.
By Thomas King,  Thu Feb 2 2012, 13:55
Great information to distribute at this time if year!
By Yris Arpino,  Thu Feb 2 2012, 13:55

Thanks for the fantastic information.
By Maria Sabio,  Thu Feb 2 2012, 14:11
Thanks Tara...definetly something all homeowers need to know!
By Jim Cramer,  Thu Feb 2 2012, 14:29
Thanks Tara more Great Stuff!!
By james194848,  Thu Feb 2 2012, 14:38
Atlantic city homes vaule has decreased since we bought our home I paid 250,K and I'm told it decreased by $85K how can I sell it to get what I own on it? Or do I just go bankrupt on this property since I own another.
By Pamela A Strong,  Thu Feb 2 2012, 14:49
I will pass this on for new home buyers for sure. I posted it on my face book also. Thanks
By Timothy M. Garrity,  Thu Feb 2 2012, 15:00
Awesome, awesome stuff, Tara.

Timothy Garrity - Realtor & Consultant | http://phillyurbanliving.com
By Helen Oliveri,  Thu Feb 2 2012, 15:13
Great tips Tara! Here is a detailed list of Tax breaks for Energy Efficient Items. http://ase.org/resources/energy-efficiency-home-and-vehicle-tax-credits#home_improvement_11
By Mcc,  Thu Feb 2 2012, 15:57
The information was not written very well. It is unprofessional not to mention, or provide the link to the IRS website with direct information on the Mortgage Forgiveness and Debt Relief Act regarding foreclosures. It's time for Trulia to ensure that experienced experts review the articles before they are published.

Here: http://www.irs.gov/individuals/article/0,,id=179414,00.html

By Maria Fabiano,  Thu Feb 2 2012, 16:10
Great information!
By Gary Ellis,  Thu Feb 2 2012, 16:15
Great Postive information for all homeowners to know. a little saving in these economic times is a lot!
By Mary Lewis,  Thu Feb 2 2012, 16:34
Great info! And let's not forget the exemptions for the sale of personal residences for folks who sold their primary residences with gains.
By Matthew Hars,  Thu Feb 2 2012, 16:44
very interesting
By Michael Musgrove,  Thu Feb 2 2012, 16:59
Always good reminders to have this time of year!
By Jordon Wheeler,  Thu Feb 2 2012, 17:37
Thanks Tara for good timely information. Also important to note regarding number 5, the amount has to be $600 or more before it is taxable as income. So the IRS does allow less than $600 in debt cancellation without having to pay income taxes for debt cancellation.
By Lorena Barbosa,  Thu Feb 2 2012, 17:55
great Tara - this is very useful for ourselves and our clients!
By Joseph Allen,  Thu Feb 2 2012, 18:54
Thanks,any information that can lead to a reduction in taxes is very beneficial. Continue to provide this kind of information so we can use it.
By Anthony Paganini,  Thu Feb 2 2012, 19:54
"Long story short, your new home must be at least 50 miles farther from your new workplace than your old home was from your prior place of work" That can't be right?
By Jeanswore123,  Thu Feb 2 2012, 20:19
Really informative and interesting….. I would like to Thanks for the informative post. I really appreciate it. I hope this will be beneficial for me. Thanks for sharing.

By Stephanie Leon PA 786-574-3928,  Thu Feb 2 2012, 20:29
Great post and just in time for tax season.... Thanks for sharing..
By Jerrilyn Levetan,  Fri Feb 3 2012, 04:45
Very informative! I'll enjoy sharing this. Thanks
By Wayne & Patty Odenbrett,  Fri Feb 3 2012, 05:31
Perfect timing ....just in time to start on my taxes
By Deborah Griffin,  Fri Feb 3 2012, 06:23
Tara, Thanks…perfect timing!
By Rich Thomas - (240) 463-3706,  Fri Feb 3 2012, 06:29
Thanks for the great info. As always relevent and accurate!
By Altahartenburg,  Fri Feb 3 2012, 06:46
please remove fm your mailing
By Jack Gillis, CRS, M.B.A., J.D.,  Fri Feb 3 2012, 08:14
Good information. Thanks for the post.
By Brenda Feria,  Fri Feb 3 2012, 08:19
Great information for those who don't know where to begin.
By Crystal Cordova,  Fri Feb 3 2012, 08:55
It would be really great to post tax ideas for realtors. Many don't know about section 179 which I learned about recently and still am not sure about completely. New agents would definitely benefit from some tax pointers!
By Adrian Chu,  Fri Feb 3 2012, 12:06
Great article!!
By Lucy Tully,  Fri Feb 3 2012, 12:10
Please have one for Realtors -- We could use some good tips too.
By Tim Truong,  Fri Feb 3 2012, 12:43
Very helpful information. Of course this information is general, tax payers should consult with their tax preparers for details and exemptions (#5).
By Adrian Provost,  Fri Feb 3 2012, 15:04
Wonderful piece Tara!

http://www.AdrianProvost.com || http://www.Twitter.com/AdrianProvost
By Mary Novak, CDPE, SFR,  Sat Feb 4 2012, 06:48
great tips! Thanks for sharing.
Professionally Bringing Homebuyers & Sellers Together
By Rashid Yusuf,  Sat Feb 4 2012, 07:14
You hit a home-run with this valuable information. Thank you.
By Michael,  Sat Feb 4 2012, 07:44
Many have mentioned the debt relief act, but failed to mention the document that you will need to "reap the benefits" of possibly having your debt forgiven. The form for the cancellation of debt is IRS form 982 (Reduction of Tax Attributes due to Discharge of Indebtedness).
By Martha Valerio Lauria,  Sat Feb 4 2012, 17:15
Great tips, Tara!
By Barbara Ann Grady,  Mon Feb 6 2012, 05:27
Thank you, Tara. You are always very informative.
By Stephanie Lang,  Mon Feb 6 2012, 14:38
Definitely good to know! Thanks for the tips Tara!
By Bill Heenan,  Tue Feb 7 2012, 08:08
Great information Tara. Thank you!
By Voices Member,  Wed Feb 8 2012, 10:37
Great info!
By Vicki Begley,  Thu Feb 9 2012, 14:43
Sound advice! Thanks!
By Russell Babbitt,  Fri Feb 10 2012, 06:14
If you read the IRS website's explanation and guidelines for moving expenses, the information here is incorrect. As stated, it makes no sense, as Anthony pointed out.
By Rosa Bucchio - Local Expert,  Fri Feb 10 2012, 13:40
Great article but the link didn't work when I tried to forward it.
By Joanne Bernardini,  Sun Feb 19 2012, 05:32
This is a very timely piece! I will forward it to all my clients! We all want those tax dollars back in our own pockets!
By Vashmir H. Pascal,  Wed Feb 22 2012, 14:19
Great advice thank you.
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By Patti Chapman,  Fri Feb 24 2012, 17:32
Good check list Tara ~ thank you for sharing.
By David J. Moore, ABR, GRI,  Mon Feb 27 2012, 10:25
Thanks for the good info! Already posted to FB.
David J. Moore ABR, GRI

David J. Moore Properties, Houston, TX
By Matthew Hars,  Thu Mar 1 2012, 21:36
very interesting
By Anishkumar854,  Wed Mar 21 2012, 06:11
These are great tips for reduction in taxes and if we don’t know anything about it then we should consult with a tax professional who can give us better ideas to relief from taxes. Short term and long term capital gain is also a tax advantage that can be achieved by you.
property in jaipur
By Ledbetter Home Team,  Sat Apr 21 2012, 10:34
Good information. It good to stay informed.
By Cashflow Quadrant,  Mon Jun 11 2012, 00:37
Nice info, thanx for your efforts

check this book http://www.govasool.com/index.php/details/7929/management/books/cashflow-quadrant-by-robert
By Elli Lou Ilano,  Sun Oct 6 2013, 01:11
For fillable Form 1065 you can find it at PDFfiller.com
You can fill the text fields, add a variety of checkmarks, digitally sign the form and even add pictures. After your pdf form is completed, it can be printed, emailed, faxed or saved on your computer. You can even send fillable pdf forms to your customers, employees, vendors and partners.
By Tim Johnson,  Fri Jul 18 2014, 14:37
So from what you're saying, I should take as many of these documents as I can to my tax preparation agent? I'd try to do it myself, but after you mention all of these ways in which I could get a break, I wouldn't want to try it myself. It's always a busy time come April for taxes. This year I'm definitely going to get on top of it early and do it in February. http://www.mhgarelick.com
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