I am closing on Dec 29'2004. Are there any potential real estate tax implications in closing before end of the year vs during beginning of new financial year.(2005) I have heard of significant difference although not sure.
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in the states that I have had real estate dealings in , the tax for the county fiscal year was prorated as of the day of closing. taxes before closing date paid by seller, those for after closing paid by buyer. Check with your closing attorney or county tax office for details in your county.
JMHO
Carl
JMHO
Carl
Congratulations on your new home!
I am no CPA, but I've dealt with houses and their issues for quite a while--so I might have some general comments that hopefully will help.
I really don't think you'll see much benefit this year ('04).
Like Carl says, property taxes are pro-rated, so you'll have owned the home all of two days in '04--not much deduction there.
Interest is always a deduction biggie--but there too--you're talking only 2 days interest. Not much deduction. But the good thing is that you only have 2 days' interest before (normally) some principal is paid. Tax savings is one thing--but the problem is that you have to pay out way more interest than you get back in taxes. So why not try to pay as little interest as possible?
Tax-wise, the one thing I'd try to do is (if it's possible) is try to defer deductible closing costs (such as "points") till NEXT YEAR'S TAXES. At least that way you can deduct them in '05. I really doubt this'll be possible though--as everything will have that DEC29 date on it!
One thing that might get you around that problem (deductible points) is if you can delay closing till January (sometimes closings get delayed anyway, beyond your control). But then again, you might end up paying several weeks' interest before the first principal payment is made. The effect is lengthening the loan at your expense. If this were to happen, I'd try to make an extra principal payment or two. At the beginning of a typical loan, interest is WAAAAYYYYY more than principal.
Regards,
-k2 in CO
Moderator, Miscellaneous Forum
http://www.bobvila.com/BBS/Miscellaneous
I am no CPA, but I've dealt with houses and their issues for quite a while--so I might have some general comments that hopefully will help.
I really don't think you'll see much benefit this year ('04).
Like Carl says, property taxes are pro-rated, so you'll have owned the home all of two days in '04--not much deduction there.
Interest is always a deduction biggie--but there too--you're talking only 2 days interest. Not much deduction. But the good thing is that you only have 2 days' interest before (normally) some principal is paid. Tax savings is one thing--but the problem is that you have to pay out way more interest than you get back in taxes. So why not try to pay as little interest as possible?
Tax-wise, the one thing I'd try to do is (if it's possible) is try to defer deductible closing costs (such as "points") till NEXT YEAR'S TAXES. At least that way you can deduct them in '05. I really doubt this'll be possible though--as everything will have that DEC29 date on it!
One thing that might get you around that problem (deductible points) is if you can delay closing till January (sometimes closings get delayed anyway, beyond your control). But then again, you might end up paying several weeks' interest before the first principal payment is made. The effect is lengthening the loan at your expense. If this were to happen, I'd try to make an extra principal payment or two. At the beginning of a typical loan, interest is WAAAAYYYYY more than principal.
Regards,
-k2 in CO
Moderator, Miscellaneous Forum
http://www.bobvila.com/BBS/Miscellaneous
