Home Tax Issues
Question: Can I deduct improvements made to my home?
Answer: Yes, but only after you have sold it because improvements add to the
basis of your home. Your gain is defined as your home's selling price, minus
deductible closing costs, minus your basis. The basis is the original purchase
price of the home, plus improvements, less any depreciation. The IRS defines
improvements as those items that "add to the value of your home, prolong its
useful life, or adapt it to new uses" - such as putting in new plumbing or
wiring or adding another bathroom.
Question: Are victims whose homes are damaged by natural disasters granted any
tax relief?
Answer: Damage, destruction, or loss of property from fires, floods, earthquakes
and other disasters are deductible from both state and federal income taxes. If
destruction is caused by an event deemed a federal disaster by the president,
homeowners can deduct their losses in the tax year before the event happened by
filing an amended return. This helps to dramatically cut the wait for tax refund
money that can immediately be used to make repairs or pay for living expenses.
Question: Are special tax breaks available for historic rehabilitation?
Answer: Certified historic structures now enjoy a 20 percent investment tax
credit for qualified rehabilitation expenses, if they are income producing
properties. A historic structure is one listed in the National Register of
Historic Places or so designated by an appropriate state or local historic
district that is certified by the government. The tax code does not allow
deductions for the demolition or significant alteration of a historic structure. For more information, contact the National Trust for Historic Preservation at
(202) 588-6000, or visit its web site at
www.nationaltrust.org. Many states
offer tax incentives, reductions and abatement programs for owners of
residential historic homes. These programs are described on the National Trust's
web site.
Question: Can I contest my property taxes?
Answer: Many people do, mainly because determining value can often be tricky.
This is especially true in a changing market when local prices either take off
dramatically or plunge precipitously, like during the Texas oil bust of the
1980s.
While it is up to a professional assessor to evaluate property value for tax
purposes, property owners are usually allowed to contest their assessment until
a certain date after they are made public.
Once you contest, you will have to prove why you think your property is worth
less - few homeowners contest hoping to pay more taxes! The two most popular
ways for determining value are an appraisal and a comparative market analysis
(CMA). With an appraisal, a professional estimates the property's market value based on
recent sales of comparable properties. A comparative market analysis is an
informal estimate of market value performed by a real estate agent based on
similar sales and property attributes. Most agents will offer free analyses to
win your business.
Contact your local tax assessor's office for procedures on appealing your
property tax assessment.
Go Back
