DEAR BOB: In January 2004, we refinanced our home mortgage and paid a $2,400 loan fee to the lender. When we had our 2003 income taxes prepared, we asked if we can deduct the loan fee on our 2004 tax returns. The tax preparer said “no.” She says we can deduct that $2,400 loan fee at only $80 per year for the next 30 years. If this is true, what a rip-off! – Rolf R.
DEAR ROLF: Your tax preparer is correct. When refinancing a home mortgage, you can only deduct any mortgage loan fee paid over the life of the loan, presumably 30 years in your situation.
Purchase Bob Bruss reports online.
Now you know why I yell and scream for refinancing homeowners to never pay a mortgage loan fee, even if they have to pay a slightly higher tax-deductible mortgage interest rate.
WHEN RELATIVE DIES WITHOUT A WILL, IT MUST GO THROUGH PROBATE COURT COSTS AND DELAYS
DEAR BOB: My aunt recently passed away. I am her beneficiary on her insurance policies. But she didn’t leave any will. She has a house. I am her only living relative. Is the house mine? – Cindy B.
DEAR CINDY: When a person dies without a will, or a living trust, their estate must go through Probate Court to be sure the deceased’s assets are distributed to their closest surviving relatives. This is called the law of intestate succession.
The situation you describe will cause you unnecessary grief, plus costs and delays. It could have been avoided if your late aunt had left a written will or had placed her major assets into a living trust.
The house and other major assets should eventually become yours unless a closer relative is discovered. But first the assets must be probated and your aunt’s debts must be paid before the assets can be distributed to you. For more details, please consult a local probate attorney.
DEATH IS THE ULTIMATE TAX SHELTER OF ALL
DEAR BOB: My father-in-law died in July 2004. My mother-in-law died in 2003. I know her $250,000 home-sale exemption expired. His house needs to be sold. But must the house be sold this year to use his $250,000 exemption? – Barb P.
DEAR BARB: The date of home sale is irrelevant. The reason is there is no capital gains tax to pay after a property owner dies. Uncle Sam forgives capital gains tax when the owner dies.
Instead, the house and other assets become part of the deceased’s estate. If your father-in-law’s estate is less than $1.5 million, it is exempt from federal estate tax. Unless your father-in-law left a total estate more than $1.5 million, taxes are not a concern. For more details, please consult your tax adviser.
The new Robert Bruss special report, “Robert’s Realty Rules: How to Avoid the 10 Worst Home Buyer Mistakes,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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