Kathy Low

For tax purposes, deductions for residential real estate held for personal use generally fall into two main categories:

· costs that can be deducted as expenses from a buyer's or seller's personal income on a tax return
· costs that can be used to alter the basis of the home, with the idea of lowering the capital gains

Note that a second, or vacation, home generally qualifies for all of the same deductions as a principal residence provided that it isn't rented for a significant portion of the year.

Buyers may deduct the following items associated with buying a home as expenses on their personal income tax in the year that they buy the home.

Points-including loan origination fees and loan discounts, provided that the home is your principal residence, the amount is clearly stated on the settlement statement, and the purchase meets the nine criteria for deducting points established by the IRS. (See www.irs.gov/prod/forms_pubs/pubs/p53001.htm for details on these criteria.)

If the buyer doesn't satisfy all of these criteria, points must be prorated and deducted over the life of the mortgage.

Buyers may add the following costs associated with a purchase to the basis of their home. These additions will increase the basis and serve to lower the capital gains liability when the home is eventually sold:

1. Transfer or stamp taxes and recording fees, if paid by the buyer.

2. Title abstracts.

3. Title insurance.

4. Attorney's fees for preparing their documents for closing.

Buyers cannot deduct as expenses on their income tax or add to the cost basis of the home:

1. Fees for an appraisal required by the lender.

2. Rent paid to occupy the home before closing.

3. Cost of credit reports.

4. Loan assumption fees.

During the period of homeownership, owners of single-family homes, condominiums, coops, and other types of property occupied as a principal residence may deduct the following items as expenses each year on their income tax returns:

1. Interest paid on a mortgage loan(s) of $1 million or less taken out to buy, build, or improve a home. If the loan amounts you owe on your first and second home together exceed $1 million, not all interest is deductible. Note that married couples filing separately may each deduct interest on a total mortgage debt of $500,000.

2. Late payment charges on mortgage payments

3. Real estate taxes paid on the home in the year they are paid

Homeowners may not deduct:

1. Homeowners association dues or assessments.

2. Premiums for fire or homeowners' insurance. (Note that this is often included in the monthly house payment.)

At the time of the sale, the sellers may deduct the following expenses from their income taxes:

1. Any reserved real estate taxes credited to the buyer at closing. However, these deductions can't be taken until the year that the property taxes are actually paid to the taxing body.

2. Any mortgage interest paid for the portion of the year that the house was owned.

3. Any remaining, undeducted points for the satisfied mortgage.

In calculating the capital gains resulting from a sale, the sellers may add the costs following items to their existing basis:

1. Transfer or stamp taxes and recording fees, if paid by the seller.

2. Recording fees, if paid by the seller.

3. Attorney's fees for preparing their documents for closing.

4. Real estate commissions paid to a broker and sales associates.

5. Money spent to repair the house prior to sale, if spent within 90 days of the sale.

Tax laws can change frequently. Always consult an accountant or tax attorney if you have questions on real estate tax issues.

For all your real estate needs, contact us at Abacus Properties, Inc., where customer service is our priority!

Kathy Low/Broker

Abacus Properties, Inc.

(858)583-4631

www.AbacusPropertiesInc.com

Here are the traditional distribution of expenses associated with a purchase of real estate. However, many of these items can be negotiated by both parties at the time of the offer, excluding some expenses required by the lender to be paid specifically by seller.

Buyers typically pays for:

• Escrow fees
• Document preparation(if applicable)
• Notary fees
• Recording charges for all documents in buyer's name
• Termite inspection(according to contract)
• Tax proration(from date of acquistion)
• All new loan charges(except those required by lender for seller to pay)
• Interest on new loan from date of funding to 30 days prior to first payment date
• Assumption/Change of Records fees for take-over of existing loan
• Beneficiary Statment fee for assumption of existing loan
• Inspection fees(roofing, property inspection, geological, etc.)
• Lender's policy
• Fire insurance premium for first year

Seller typically pays for:

• Real estate commission
• Escrow fees
• County documentary transfer tax
• Homeowner's transfer fee
• Applicable city transfer/conveyance tax
• Document preparation fee for deed
• Any loan fees required by buyer's lender
• Payoff of all loans in seller's name
• Interest accrued to lender being paid off
• Statement fees, reconveyance fees and any prepayment penalties
• Termite inspection and termite work(according to contract)
• Home warranty
• Any Judgements, tax lien, etc. against seller
• Tax proration
• Any unpaid homeowner's dues
• Recording charges to clear all documents of record against seller
• Any bonds or assessments
• Any and all delinquent taxes
• Notary fee - escrow fee
• title insurance premium: Owner's Policy

If you are relocating to San Diego, Call our Team at Abacus Properties, Inc. to assist you in finding your dream home! Call Kathy TODAY to start your home search!

Kathy Low

Broker

Abacus Properties, Inc.

(858) 583-4631

www.AbacusPropertiesInc.com

Landscaping

• Lawn in good condition
• Hedges trimmed
• Yard cleared of leaaves & papers
• Fence in good repair

Home Exterior

• Painted & repaired
• Doors work easily & silently
• Doorbells operating
• Driveway free of grease

Garage

• Doors work easily & silently
• Workbench & tools neatly arranged
• Floor cleaned & in good condition

Living Room

• Walls & ceiling freshly painted or cleaned
• Curtains clean & in good condition
• Carpeting clean & in good condition
• Windows clean

Kitchen

• Range & oven clean
• Sink clear of dishes
• Cupboards neat
• Faucets in good repair
• Windows clean
• Walls & ceiling freshly painted or cleaned

Bedrooms

• Walls & ceiling freshly painted or cleaned
• Beds made & toys put away
• Closets neatly arranged
• Cutains clean & in good condition
• Windows clean

Bathrooms

• Floors cleaned & in good condition
• Lavatory & commode clean
• Shower & tub clean & in good condition
• Faucets in good condition

If you are thinking of selling your home, let our Team at Abacus help you get the best possible price at the least time for you!

Call TODAY to get a free Market Analysis!

Kathy Low

Broker/Team Leader

Abacus Properties, Inc.

(858)583-4631

www.AbacusPropertiesInc.com

This list will give you an idea of what items are typically included in closing costs(not the specific amounts, as fees can vary). The buyer and seller may negotiate "Who Pays What", but once the contract is signed, instructions cannot be changed unless mutually agreed upon by all parties in writing.

Real Estate Commission

If the property is listed or sold by an agent, there will be commission(s) to calculate.

Taxes

The seller is required to pay the property taxes through the last day of ownership.

Homeowner Insurance

The buyer will purchase a fire and hazard insurance policy. Frequently the lender requires the first year's insurance premium to be paid at close of escrow.

Assessments and Liens

Assessments or liens against individuals and/or the property must be paid off before the close of escrow. The title company will normally show much of this information in the Preliminary Report or Commitment and the escrow officer will work with the appropriate parties to clear up any problems so that the escrow my close.

Escrow Fees and Title Insurance

Depending upon the customs of the area, the seller or the buyer can pay the title insurance fee that is referred to as the owner's(or homeowner's) policy. The owner's policy covers the new owner's interest and "title" to the new property. The buyer typically pays for the "lender policy" that will cover the new lender's interest in the "title" to the property. "Who Pays" the escrow fee is frequently dictated by county or regional custom, but is generally split between the buyer and the seller except on certain types of government loans.

Inspections and Other Fees

• Attorney's fees
• document preparation fees
• loan fees
• notary fees
• pest inspection
• tax service fees
• deed recording charges
• home warranty
• natural hazard disclosure report
• pest correction costs
• special courier or delivery fees

Thinking of buyer or selling your home? Let our Team at Abacus Properties, Inc. serve you! Call TODAY!

Kathy Low

Broker

Abacus Properties, Inc.

(858)583-4631

www.AbacusPropertiesInc.com