New Homeowner Tax Advice Wanted

[Dan Gould]

The question about refinancing closing costs reminds me:

Does anyone have advice for me and my wife, first time homeowners in the 2004 tax year?

Is it really best to find an accountant or use H&R Block? My wife was ready to go to Block but she did some investigating online and found many horror stories of hidden charges and questionable business practices and no longer has any interest in using them.

We've previously used a tax filing program (can't recall the name at the moment) that's been pretty straightforward. My thought is that its almost certainly just as effective for homeowners.

Right now, my advice to her is to go ahead and download the program, throw the numbers in and see what it kicks out.

But any tax advice for new homeowners is greatly appreciated!

Edited February 15, 2005 by Dan Gould

[marcello]

Dan - It really depends on the State you live in with regards to tax questions. If you don't have a complicated return with a lot of income streams and deductions, you return shuld be a no brainer to do yourselves. You could always have the IRS volenteers do it for you for nothing.

[Hardbopjazz]

If you go to www.irs.gov you can do it on line. The IRS has links to all the different software products such as Turbo tax. I did mine in Turbo Tax. If you are expecting a refund, it will e-file and deposit the money right into your account. The charge to e-file when you are getting a refund is 19.95 otherwise it was free. I did mind 2 weeks ago and got my return already. If this is the first time e-filing, it will take a little longer to get your return. The Federal government will want you to sign a form so they can have your signature on file so they know it's you. But then next year when you file, all you need is to answer a simple question, such as what is the figure on line 33 of lasts years return. My return to a total of 9 business days to get deposited in my checking account.

For you, since you bought a home in 2004, you can claim the closing costs and interest and property taxes. You should get a nice hunk of change back. Enough to get a number of Mosaic sets.

Edited February 15, 2005 by Hardbopjazz

[Brad]

I use an accountant. It's just a hassle to do it otherwise. When I moved to NJ as part of a corporate move, the company I worked for furnished for free the services of an accountant who did it for us. Now that was a complicated return because we're selling a house in one state and buying it in another. But I've used them since and it's just so easy. You fill out the questionnaire and they do the rest. I just think it's worth the time and aggravation you'd otherwise spend. I remember those days staying up late, etc., just like in the ads. This is a billion times better. I recommend an accountant. It simplifies everything.

[connoisseur series500]

I use a tax preparer (not accountant!) She prepares tax returns for a living and does a good job. Charges about the same as HR Block but does a better job. I'd look through the yellow pages to find someone. CPAs are often too expensive; and I don't trust Block at all. You might get a good Block employee or a moron. It's total potluck. In the meantime, they will try to "sell" you a Roth-IRA or regular IRA, which, to me, represents a conflict of interest.

[Dan Gould]

There's no income tax in Florida, so it does seem to me a relatively simple return. I understand we deduct closing costs and property tax as well as mortgage interest . . . we put about $6000 into the new roof and the new A/C unit. As Capital Improvements, aren't they also deductible?

I think we will use the program we've been using (we've always filed electronically anyway) and see how it does. I would think that when we enter the amount for mortgage interest, its going to kick us into a whole nother section and start asking about when we brought the house, closing costs, etc. and put them all in their right place and work out fine.

Now, when my wife's mortgage broker career takes off and she starts looking at quarterly filings, we'll definitely be in need of a decent accountant. But for now, I'm hoping we can get this done ourselves.

[Uncle Skid]

I also use an accountant, primarily because I'm self-employed (S-Corp, so I have to file a corporate return as well). Worth every penny I pay the guy, as I'm sure it's done correctly, and I don't have to deal with it. The cost difference between those PC programs and a decent accountant has come down over the years, so that's made the PC stuff less attractive.

Dan, I'm pretty sure that improvements to your house are not deductible. Just mortgage interest, property taxes, and maybe some of your closing costs.

[Hardbopjazz]

we put about $6000 into the new roof and the new A/C unit. As Capital Improvements, aren't they also deductible?

If the money came from a home equity line of credit it deductable. Not sure if it is if you use your on money. I put a bathroom in and if I paid cash or got a home equity loan it wasn't deductable, bit if you get a home equity line of credit the intrest is deductable.

[Dan Gould]

Well I'm confused now because at least two other people were telling us that this kind of expense is deductible. I thought the law distinguishes between structural things like a new roof and remodelling a room.

[Uncle Skid]

I'm confused as well. I had to put in new furnace/air conditioning last year, so I wanted to find out for sure.

Here's more information than you could possibly ever want: Publication 530 (2004), Tax Information for First-Time Homeowners

Improvements.  An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. You must add the cost of any improvements to the basis of your home. You cannot deduct these costs.

Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway.

But, it looks like hardbopjazz is correct -- the rules are different when you're talking about a home improvement loan. If I understand this one correctly, you can write off the interest on the loan, but not the actual costs of the improvements.

[Dan Gould]

Thanks, for clarifying that, Mark!

[Eric]

I'm confused as well. I had to put in new furnace/air conditioning last year, so I wanted to find out for sure.

Here's more information than you could possibly ever want: Publication 530 (2004), Tax Information for First-Time Homeowners

Improvements.   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. You must add the cost of any improvements to the basis of your home. You cannot deduct these costs.

Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway.

But, it looks like hardbopjazz is correct -- the rules are different when you're talking about a home improvement loan. If I understand this one correctly, you can write off the interest on the loan, but not the actual costs of the improvements.

This is correct. Capital improvements add to your basis (i.e. original cost), so they reduce future taxes that you might have to pay on the sale of your home.

[medjuck]

Your home improvements would only be deductable if you were renting our part of your house and declaring the income. And even then you could only depreciate them over several years.