Everything You Need to Know About IRS Publication 530
If you’re a homeowner, you know that one of the most important aspects of owning a home is knowing how to file the correct taxes.
Every house has a unique breakdown of costs required for its maintenance. Some of these costs can be deducted from your taxes, like state and local real estate taxes. Other costs are nondeductible, such as utility payments.
Understanding your tax requirements can not only save you a headache when it comes time for filing season, but it can also save you money. So let’s take a closer look at everything included in IRS Publication 530.
Table of Contents
KEY TAKEAWAYS
- If you’re a homeowner, IRS Publication 530 is essential to understanding your tax filing requirements.
- IRS Publication 530 contains detailed information covering what costs can and can’t be considered tax deductions.
- If you need help calculating mortgage interest credit, IRS Publication 530 will walk you through the calculation.
What is IRS Publication 530?
IRS Publication 530 is a federal tax document for homeowners. It offers guidance on how to treat home ownership costs when filing taxes.
The document includes information on both deductible and nondeductible costs. In other words, what expenses can you deduct from your tax bill, and what costs must you pay? It also covers mortgage interest, capital gains, repairs and closing costs.
Who does IRS publication 530 help?
IRS Publication 530 is for any homeowner that needs help figuring out their real estate tax bill. The document targets owners of primary residences and answers many questions homeowners ask. In addition to home-related tax deductions, Publication 530 also provides information on how to figure out the basis of your home. It is not intended for real estate investors and owners of residential rental properties.
Primary residences include properties that have defined spaces for sleeping as well as toilet and cooking facilities, such as:
- Single-family homes
- Condominiums
- Apartment co-ops
- Mobile homes or trailers
- Apartment homes
- Houseboats
What does IRS publication 530 cover?
IRS Publication 530 is a comprehensive resource that covers the following information regarding filing homeownership taxes:
- What you can and can’t deduct from your taxes
- State and local real estate taxes
- Sales tax and home mortgage interest
- Sample calculations for figuring out mortgage interest credit
- Information on figuring the cost basis of your home
- Recommendations for keeping appropriate records
Items that can be deducted from taxes
The following items can be deducted from taxes:
- State and local real estate taxes
- Mortgage interest
- Mortgage insurance premiums
To deduct expenses of owning a home, you must file Form 1040 and itemize your deductions on Schedule A.
You may also choose to deduct state and local general sales taxes instead of state and local income taxes. This might include the sales tax paid on your home or even taxes on home building materials.
Items that cannot be deducted from taxes
The following are considered non-deductible items:
- Insurance costs
- Domestic help wages
- Utility costs, including internet, gas, electricity or water bills
- Most settlement costs
- Depreciation
- Forfeited deposits
- Homeowners association fees
- Repairs and home-related items
- Charges for services such as internet
- Transfer taxes
- Homeowners’ association assessments
- Foreign taxes paid on real estate
Summary
IRS Publication 530 is an essential resource for all homeownership real estate tax purposes. It covers all the information you need to deduct items from your tax bill and includes helpful calculation and record-keeping resources.
FAQs on IRS Publication 530
According to the IRS, a home improvement is anything that materially adds value to your home, adapts it to new uses or significantly extends its lifespan. These are considered nondeductible costs. Examples include installing a new roof, finishing the basement, or re-wiring the house. Capital improvements, such as adding a swimming pool, or a new roof can be added to the cost basis of your house. This may help you reduce your taxes when you sell your house. Certain energy-saving home improvements can also yield tax credits at the time they are incurred.
Generally, you can’t deduct home improvement costs. However, there may be tax credits related to energy-efficiency improvements, medical care or home office setups. Check with a qualified tax advisor to learn more about these deductions.
You must report the sale of your home to the IRS if you receive an income-reporting document like Form 1099-S, Proceeds From Real Estate Transactions. You must also report the sale if you cannot exclude all your capital gains from your income. You will need to use Schedule D (Form 1040), Capital Gains and Loses and Form 8949, Sales and Other Dispositions of Capital Assets.
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