Deductible

Q: I have a single-family home in which I lived for nine years before converting it into a rental. The house has a $50,000 mortgage on it, but is worth $200,000. I would like to refinance the mortgage and take equity out of the house.Can I still get a tax deduction on the new mortgage? What is the maximum tax-deductible mortgage allowed on a rental house?A: Because this home is neither your first nor second residence, if your newly refinanced mortgage exceeds $50,000, the critical issue is not its actual amount but the use to which you put the proceeds.

For taxpayers who work best under the pressure of a deadline ... well, that's now. Returns must be filed by the end of Monday. But there's always a risk when scrambling to get returns in under the wire. You might make a mistake or overlook a valuable tax break. To avoid that, here are some tips for last-minute filers: File for free: The Internal Revenue Service partners with tax preparation companies to provide free online filing of federal returns if your adjusted gross income is $57,000 or less.

If you changed job locations or started a new job, you might be able to deduct your moving expenses. The expenses are deductible in the year paid or incurred, but you can elect to deduct them in the year you are reimbursed.These expenses are deductible, provided that the amount is adjudged "reasonable":* Moving household goods and personal effects.* Traveling (including lodging and 80 percent of the cost of meals) to the new residence.* Traveling (including lodging and 80 percent of meals)

Would you support a tax reform measure that could help reduce the federal deficit, remove a needless distortion in the economy and make the system fairer? Me too, which is why I'm taking aim at a sacred cow: the home interest mortgage deduction. That's right, the mortgage interest deduction that every homeowner, including me, loves. If you listen to home builders and real estate agents, they'll tell you that the mortgage interest deduction is what makes homeownership possible for millions of Americans.

Q: One of your past columns stated that a penalty for early withdrawal on a certificate of deposit is tax-deductible as a capital loss. Does this also apply to annuities? My wife cashed in a tax-deferred annuity of $2,315.70 early and was charged a 10 percent penalty. Is this tax-deductible?A: That depends on whether it was an early redemption fee charged by the insurance company or an Internal Revenue Service penalty for withdrawal prior to age 59 1/2 . IRS penalties are never deductible.

Some people, I am told, actually look forward to filling out income tax forms. Tax accountants, for example. Or, to name names, Mr. and Ms. H & R Block.Most people, however, regard filling out income tax forms as something preferable only to being trapped in a room for an entire week while Whitney Houston sings "I Will Always Love You."I, for your information, fall into the second category.To be brutally frank, I am not amused by printed forms that require the following:(a) that you add and subtract.

Q: My husband died recently. My lawyer's bill for settling the estate was $4,683, which I paid.In making out my income-tax return this March, I put that amount down as a deduction. A friend who helps me prepare my taxes said I could not use it as a deduction from my income because the lawyer's bill for settling an estate is not deductible from income. Which of us was right?A: Lawyer's fees for estate settlement are generally not deductible on income-tax returns, so, technically speaking, your friend was correct.

This is the season when many people stay up late into the night figuring ways to justify writing off home computers, vacations and other personal items as business expenses.Business- and job-related expenses do represent a potentially lucrative reservoir of tax deductions for individuals. The cost of hunting for a new job, going to night school, buying a personal computer, attending a midwinter convention in Hawaii, and wining and dining clients can often be written off if a true business purpose can be substantiated.

The tax law allows a deduction for mortgage interest on a qualified primary residence and one vacation home. Specifically, to be deductible, the purpose of the mortgage must be for acquisition or improvement.A careful reading of the law reflects that points charged by a bank upon the refinancing of a mortgage also are deductible as interest expense.However, the law does not specify whether refinancing points are fully deductible in the year paid or if they must be prorated over the life of the new mortgage.

What expenses associated with buying and owning a home are tax deductible?With certain limitations, the property taxes and mortgage interest you pay on a personal residence are deductible from your income tax in the year in which they were paid.Some of the costs associated with home buying (called closing costs) are tax deductible. For example, the loan origination fee (called "points") is considered prepaid interest by the IRS and is deductible in the year you purchase the house. Since 1 point is equal to 1 percent of the loan amount, this can add up to a sizable tax deduction.

On his 19th century travels through the United States, the French philosopher Alexis de Tocqueville marveled at the American experience of a diversity of civic organizations formed through gifts of time and money. "Wherever at the head of some new undertaking you see the government in France, or a man of rank in England," he observed, "in the United States you will be sure to find an association. " Nearly two centuries later, the American tradition of philanthropic giving to organizations continues to be a model for the world.

When Anne Arundel County Executive John R. Leopold returned his automatic pay raise in solidarity with county workers, he also entitled himself to an income tax deduction. Leopold says he declined it. Because the returns technically amount to a donation to Anne Arundel County government, they could have entitled him to a bigger refund on his taxes. But that extra money would also have meant breaking a promise not to take a raise if the government could not afford one for county workers.

There's a good chance during open enrollment this fall that you will be offered a high-deductible insurance plan with a savings account - if you haven't already been nudged into one. Increasingly, employers are offering this as a way to rein in their health insurance costs. The high deductible means lower premiums, benefits experts say. And employees - confronted with the prospect of potentially paying thousands of dollars before insurance kicks in - are less likely to run to the emergency room for minor problems, which also keeps costs down.

Homeowners should be wary of property insurers trying to charge percentage deductibles for damage caused by Sandy, the hurricane-turned-post-tropical-cyclone, according to a bulletin released Tuesday by the Maryland Insurance Administration. Only if the National Hurricane Center of the National Weather Service issues a hurricane warning for Maryland can property and casualty insurance carriers charge a percentage deductible - instead of the more familiar flat-rate deductible - for damage done by a hurricane or other storm, according to Maryland law. The National Hurricane Center did not issue a hurricane warning for Maryland before Sandy hit. Therefore, most homeowners should be charged a flat rate “dollar deductible” on their property insurance claims, not a deductible that is calculated as a percentage of the total value of the policy.

Some homeowner's insurance policies contain a hurricane deductible, which is a percentage of the home's value. In other words, you might have to pay a deductible of 1 to 5 percent of the home's value before insurance kicks in during a hurricane. But the Maryland Insurance Administration says that for Sandy no hurricane deductibles will apply. That's because the  National Weather Service didn't issue hurricane warnings for any counties here. That's some solace for residents who suffered property damage from the storm.

Gov.Martin O'Malley's effort to cut back on tax loopholes is a necessary step to reduce the state's income tax, and eliminating the mortgage interest income tax deduction is a good place to start ("Realtors to rally against proposed change affecting Md. mortgage interest deduction," Feb 28). While supporters of the deduction say it is an incentive to homeownership and crucial to maintain the housing market, the deduction has done very little to increase homeownership rates and is an unnecessary government subsidy of the housing market.

Editors note: Every Tuesday through the end of tax season, The Sun will run an edited transcript of Baltimoresun.com's weekly tax-advice column featuring three experts from the Hunt Valley accounting firm SC&H Group. I'm a sports official and work as an independent contractor. When I leave my house to work a game, can I deduct the mileage from my house? Are there any other things I may be able to deduct, such as a uniform, shoes, etc.? - Bob, Baltimore Independent contractors are considered to be engaged in a trade or business, and are entitled to deduct all ordinary and necessary expenses paid or incurred in carrying on their trade or business.

Editor's note: Every Tuesday through the end of tax season, The Sun will run an edited transcript of Baltimoresun .com's weekly tax advice column featuring three experts from the Hunt Valley accounting firm SC&H Group. A few years ago we bought a time share. We recently sold it, at a loss, to a company that buys up time shares and that said the loss could be written off. My reading of tax information and a call to the IRS indicate that a time share is personal use property and the loss cannot be taken on taxes.

Hundreds of Maryland Realtors rallied Wednesday in a driving rain in Annapolis to protest Gov. Martin O'Malley's proposal to phase out the mortgage interest deduction -- along with other tax breaks -- as part of his budget plan. Gathering cheers from the crowd was the governor's chief Democratic nemesis, Comptroller Peter Franchot. Using rhetoric that could easily have come from a conservative Republican, Franchot denounced the proposed deduction phase-out. "This mortgage interest deduction proposal would be a deadly blow to these small businesses and families," the comptroller said.

Is your insurer charging you a hurricane deductible for filing a claim from Hurricane Irene? If so, make sure you were in an area subject to a hurricane warning. Maryland Insurance Commissioner Therese M. Goldsmith sent out a reminder today to property insurers that hurricane deductibles can't be imposed unless a claim comes from a part of Maryland that was under a hurricane warning. Maryland counties under such a warning were Caroline, Dorchester, Somerset, St. Mary's, Talbot and Wicomico and Worcester.