Questions about possible deductions?

[stanw]

1. I purchased a house in 2011. Are closing escrow costs deductible?

2. I bought the house to be closer to my work, are moving expenses deductible?

3. In 2011 my wife paid for tax services. Are these deductible?

Thanks!

[mwcpa]

"Are closing escrow costs deductible"
No, as escrow implies funds are being held to pay certain expenses, when those expenses are paid from the escrow account they may be deductible..... for a personal residence this may be real estate taxes..... but home insurance, no, that is not deductible when paid by the escrow account.....

"I bought the house to be closer to my work, are moving expenses deductible?"
No, unless you changed jobs and as a result moved.... and the move/new job has to be over 50 miles from your old home

"In 2011 my wife paid for tax services. Are these deductible"
subject to 2% of AGI as an itemized deduction

[stanw]

So if I understand you correctly, for a personal residence, the real estate taxes paid from the funds in escrow may be deductible? If so, what determines if they are or not?

Thanks!

[mwcpa]

if the funds held in escrow are actually paid the tax collector for the home you own, then the taxes paid may be deductible (if you itemize deductions, subject to AMT)

[TheOtherMe]

Don't you love how complicated taxes are?

[Deleted]

"Are closing escrow costs deductible?"

Let's go into a little more detail about the term you used.

In some states like CA, an Escrow company is used to "close" the transaction. Therefore the "escrow" function is to hold the buyers funds and the seller's title until all of the terms of the contract are met including the loan funding et cetera. At closing, the escrow company disburses funds to pay off an old mortgage, reimburse or collect real property taxes paid/owed buy the seller and record title at the County recorder.

This is a different concept than a tax and insurance loan escrow account wherein monthly payments are made to an account and then once or twice a year payments are made to the County treasurer for taxes and the insurance premium is paid from the account.

In the first example, you want to take a look at the Settlement sheet and keep that document for as long as you own the house. VERY IMPORTANT! While you won't be able to take a tax deduction for 2011 for anything more than the pre-paid interest on your mortgage (if applicable) and property taxes paid in 2011, costs to acquire the property such as the title insurance, escrow and recording fees add to the basis of your house. When you go to sell your house down the road you will need this document to calculate your capital gain. Therefore KEEP IT IN A SAFE PLACE!

I agree with the others that in the second scenario, only the property taxes paid in 2011 would qualify for a deduction.

Hope this info helps!

[mwcpa]

easter.... please note that often the prepaid interest on the HUD-1 is often included in the annual 1098 form.... be sure to not double dip....
and taxes placed on deposit in the escrow account are not deductible, just the amount given to the seller to reimburse them for their previous outlays, if any.

[Deleted]

"taxes placed on deposit in the escrow account are not deductible, just the amount given to the seller to reimburse them for their previous outlays, if any"

MWCPA, it depends on when the taxes were paid to the County. In CA, the property taxes are due twice a year but the fiscal year runs from July 1-June 30th. Therefore, if the O.P. closed the real estate transaction in May the escrow COMPANY would collect monies for real estate taxes that the seller would have already paid back in April for the period from the closing date through June 30th. Then the lender's escrow would be collecting monies monthly starting July 1 for taxes for the period from July 1-December 31 for which payment would have been made by December 10th. Generally the goal is reconcil the book keeping effective December 31 with a 0 balance. Of course it doesn't always work that way and sometimes there are overages or shortfalls.

But the point of my post was to have the O.P. clarify by what he meant by "escrow" since there are different kinds of escrow. And that if he was referring to his closing statement that even if he couldn't deduct anything more he really needs to hang onto that paperwork.