A taxpayer may acquire a home by purchasing one from the current owner, by building his or her own home, by inheriting a home or by receiving one as a gift. Each of these has it's own tax implications.

Buying

Usually a purchaser of San Diego, California real estate will pay from 1 to 2 percent of the purchase price of the home in buying costs. These costs are found on the escrow closing settlement statement and may be classified as:

write-off itemized deductions, buying expenses added to basis or nondeductible expenses.

Itemized deductions include real property taxes, mortgage interest and points (loan origination fees) in the year paid. These are written off on the taxpayer's Schedule A.

Buying expenses are usually the nonrecurring closing costs. Some examples are appraisal fees, credit report, escrow fees, termite inspection, notary fees, recording fees and title insurance.

Nondeductible items are the closing costs that are neither a write-off nor a buying expense. These include impound accounts, homeowner's insurance and certain origination fees paid to obtain FHA or VA loans. Loan-origination fees on FHA or VA loans do not qualify as interest; they are considered to be a form of service charge.

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