Hello again XXXXXXXXXXX,

Thank you for the clarification.

For purposes of claiming deductions on a home, a home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. They are all treated the same for tax purposes as far as the deductions you may claim, so it will not matter if you buy a single family home, a townhouse or a condominium. You would be allowed the same deductions.

The only deductions you are allowed to claim in connection with owning your home woud be your mortgage interest and your property taxes. You may also deduct points you had to pay to obtain you loan. On your closing costs, it does not matter if it actually ended up resulting in a credit or negative balance. You can deduct the closing costs which pertained to mortgage interest and property taxes. None of the other closing costs are allowed as a deduction. Instead, they add to your basis in the home.

Your "basis" in the home is going to be something you want to keep track of up until the time you sell the property. Your basis will be the purchase price you paid for the home, plus any other closing costs you had other than mortgage interest and property taxes (such as appraisal fees, recording fees, title insurance). You will also add to your basis the cost of any improvements you make to the home while you own it, such as new carpeting, new roof, new A/C unit, installing a fence, etc. When you go to sell your home you will need to know your basis in order to figure if you have any taxable gain from the sale.

The cost of routine maintenance is not a dedcutible item. Major improvements are also not deductible, but they do add to the basis in your home. Your downpayment and deposit are not deductible. They are both simply part of the cost and part of your basis.

So the only items you can really deduct for tax purposes will be your mortgage interst, property taxes and any points you paid to obtain the mortgage.

As far as your sister and her son -- you may claim them as your dependents as long as neither of them had income of their own of more then $3,650 for the 2009 tax year, and as long as you have provided more than half of their total support. They also cannot be claimed by someone else as a dependent, so make sure the father of the child does not have the right to claim him. It is not a requirement that they actually live with you to claim them as dependents as long as you provide more than half of their support and their incomes are below the required limit.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you XXXXXXXXXXX, and let me know if you have more questions.



Edited by Merlo on 9/17/2009 at 1:47 PM

Hello XXXXXXXXXXX,

As far as printing this page, you are correct that you can access this when you go to work through your email and then print the page. Sometimes the page has problems printing. If that happens, what I find helps is to highlight the whole page by drawing your mouse over it an then hit "print selected text".

Regarding your sister -- if she has more than $3,650 in income of her own, then you will not be able to claim her as a dependent. You cannot claim her as a dependent and add her income to your own return. She must declare her own income. Income can never be transferred to another person. So if she made more than $3,650 for the year, you will not be able to claim her as a dependent.

As far as your nephew, you could still claim him as a dependent BUT only if your sister allows you to. She actually has the first right to claim his. The problem is that if she has any earned income at all (and apparently she does), then if her income is in a low bracket, she will very likely qualify for the earned income credit, which means she could get back as much as $2,000 for the IRS, even though she never paid in that much. When you are in a low income bracket and have a child to claim, it usually results in a pretty high credit, so your sister may actually come out way ahead by claiming her son instead of having you claim him.

As far as filing as Head of Household -- you can claim HOH, but only if they lived with you for more than half of the year. If they only lived with you since August, you would not qualfiy to claim HOH status this year.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you XXXXXXXXXXX.