What are your legitimate real estate deductions?

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.

- 1098. The meatiest 1. Mortgage Interest StatementtheIRS Formallows you to deduct real estate tax deduction on the books is one that 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.)

0. 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.

0. 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

5 copy, as well.

0. 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.

0. 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.

0. 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.

0. 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.

0. 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.

0. 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

6 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.

QUESTION: What is your tax liability When You Sell Your Home at a Loss?

You can only claim a tax loss on investment property. A loss on a personal residence is considered to be a nondeductible personal expense for federal income tax purposes.

If you're fortunate, the lender could decide to forgive some or all of the unpaid mortgage in a short sale,

But what happens tax-wise if the mortgage lender forecloses? Here is the general rule. Say your property is foreclosed (or transferred to the lender via a deed in lieu of foreclosure). When the mortgage debt exceeds the property's fair market value (FMV), the transaction is treated as a sale for a price equal to FMV. Naturally, the sale will trigger a tax gain if the FMV exceeds your tax basis in the home.

The important thing to understand here is that a real estate short sale or foreclosure can potentially result in a taxable gain and/or taxable DDI. That's the bad news. The good news is that you can probably exclude the gain from taxation, and you might be able to exclude some or all of the DDI too.

7 http://www.smartmoney.com/taxes/income/taxes-when-you-sell- your-home-at-a-loss-21058/#printMode

QUESTION: Do you have to pay real estate taxes on condominiums? If so, how is it calculated?

Also: Can you deduct interest paid for a mortgage on a co-op?

Why a condo? There are lots of reasons that a condo might be a better fit than an apartment or single home, and money is surely one of them. According to The Real Estate Journal, condo prices tend to appreciate at a slower rate than single-family dwellings, making them a more affordable choice in markets where prices are on the rise. And, compared to renting an apartment, because you actually own your condo, you can take advantage of tax deductions such as the interest on your mortgage. (To learn more, read The Mortgage Interest Tax Deduction.)

Conversely, it's important to remember that the purchase price isn't the only thing to consider when you're buying a condo. Most co-ops and condos have monthly fees for upkeep of the common property (these can be costly) and, unlike renting an apartment, you'll have to pay property taxes, too. (To learn more, readFive Tricks For Lowering Your Property Tax.)

Read more: http://www.investopedia.com/articles/pf/07/buy-condo.asp#ixzz1qPy5gYt1

IS THERE A TAX ABATEMENT PROGRAM?

In New York there is a tax abatement program. http://www.nyc.gov/html/dof/html/property/ property_tax_reduc_coop_condo.shtml