Section 15: Federal Income Tax Laws Flashcards
Taxpayer Relief Act of 1997
established rules that allow a homebuyer to withdraw money from an
IRA without penalty if the funds will be used to acquire, build, or improve a personal residence. The option is available to “first-time homebuyers,”
A homeowner can claim a capital gains exclusion
Once every 2 years
Are closing costs tax deductible?
Loan origination fee is if criteria met:
The points are average for the geographical area, the home is used as the borrower’s primary residence, and the documentation reflects the points were paid by the borrower as seen on the closing disclosure or settlement statement.
How old do you have to be to qualify for a reverse mortgage?
62
Property tax deduction
The amount of a homeowner’s annual property tax obligation can be deducted from their taxes.
What is the Mortgage Credit Certificate?
The federal Mortgage Credit Certificate (MCC) tax credit allows certain buyers to claim a portion of their annual mortgage interest as a dollar-for-dollar tax credit, in addition to the typical mortgage interest deduction.
The taxpayer must live on the property until it’s paid off, sold, or refinanced.
What type of IRS deduction can be taken for a vacation home?
Property taxes. Can be deducted for a primary residence, vacation home, or rental property.
A homeowner sells his house for $325,000 more than he bought it for. When he files his income taxes, how much of this profit may he exclude from his capital gains if he’s filing as a single taxpayer?
$250,000
Tax implications on HELOCs
The interest on a home equity loan is only deductible if the loan was obtained to buy, build, or substantially improve the homeowner’s primary residence or second home.
A taxpayer can claim a capital gains exclusion…
Once every two years
What determines a tax deduction amount?
Income tax bracket
Which one of the following is required in order for a property to qualify for the Mortgage Credit Certificate?
The taxpayer must live on the property until it is paid off, sold or refinanced.
What type of IRS deduction can be taken for a vacation home?
Property Tax
A homeowner sells his house for $325,000 more than he bought it for. When he files his income taxes, how much of this profit may he exclude from his capital gains if he’s filing as a single taxpayer?
$250,000
The maximum capital gains exclusion for single taxpayers who have lived in their primary residence at least two of the five years immediately preceding the sale of the home is $250,000.
Short-term capital gains are taxed at…
The taxpayer’s marginal tax rate.
Which one of the following statements about income tax rates is correct?
The tax rate on long-term capital gains is less than the tax rate for ordinary income.
What type of capital gain is considered short term?
A gain on a property owned one year or less.
What is taxed at a taxpayer’s marginal tax rate?
Short-term capital gains
Taxable Income Formula
Reserves (e.g. for replacements)
- Mortgage interest
- Annual depreciation
- carryover of any losses
= Taxable income
